You own a house and claim exemption under Section 54F of the Income Tax Act. However, the exemption is denied because the Income Tax Department believes you own more than one property.
In one such case, the dispute arose because the income tax department considered that the woman owned more than one house property, making her ineligible for the deduction.
However, in its order pronounced on September 10, 2026, the tribunal allowed her appeal and reversed the decision of the Commissioner of Income Tax (Appeals).
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The Income Tax Department reopened a woman’s assessment for assessment year 2015-16, alleging that she had wrongly claimed a Rs 14.70 lakh deduction under Section 54F of the Income Tax Act.
The Assessing Officer denied the deduction on the ground that she owned more than one residential house apart from the new asset, and assessed her income at Rs 16,70,500.
The woman challenged the assessment before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, but her appeal was dismissed on August 20, 2025.
The assessment proceedings referred to three properties in Nagpur. The question before the tribunal was whether the ownership of the other properties meant she failed to meet the conditions for claiming the benefit.
The tribunal described the dispute as follows: “The sole grievance of the assessee is against the deduction u/s.54F of the Act by the Revenue authorities alleging that assessee owned more than one house property making the assessee disentitled for claiming deduction u/s.54F of the Act.”
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The tribunal examined three properties mentioned in the assessment proceedings and found that one belonged to a company in which the woman was a director, while another was jointly owned by her and her husband.
It held that the company's property could not be treated as her personally owned property merely because of her association with the company.
The flat was jointly owned by the woman and her husband, although she had not contributed towards its purchase.
The order records: “So far as the third property, the same is jointly owned by the assessee and her husband and the assessee has not provided any amount towards the purchase of the said property.”
The tribunal concluded that the woman fulfilled the conditions for claiming the deduction, stating: “The assessee has fulfilled the necessary conditions for claiming deduction u/s.54F of the Act and therefore entitled to deduction u/s.54F of the Act at Rs 14,70,000/-.”
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The tribunal reversed the Commissioner of Income Tax (Appeals)’s finding, stating: “Finding of ld.CIT(A) is reversed.” It allowed the woman’s grounds of appeal and concluded: “In the result, the appeal of the assessee is allowed.”
The tribunal thus granted the Rs 14.70 lakh deduction after examining the specific property-ownership facts before it.
Kuldip Kumar, Partner at Mainstay Tax Advisors LLP notes that owning more than one residential house is one of the most common grounds on which tax authorities deny exemption under Section 54F of the Income-tax Act, 1961.
In this case, the tax authorities considered three properties while denying the exemption. The ITAT observed that one property was owned by a company in which the taxpayer was a director and, therefore, could not be treated as her property merely because of her directorship.
The second property was the new house acquired for claiming the Section 54F exemption and was consequently excluded from the count.
The third property was jointly owned by the taxpayer and her husband. Although the taxpayer had not contributed towards its purchase, the Tribunal treated her as a joint owner of that property.
The Tribunal concluded that the taxpayer owned only one residential house other than the new asset and, therefore, fulfilled the relevant ownership condition for claiming the exemption under Section 54F.
“There have been several favourable judicial decisions in which appellate authorities have held that fractional or joint ownership of residential properties should not necessarily be equated with exclusive ownership for determining eligibility under Section 54F,” he tells TOI.
In some cases, taxpayers have been allowed to claim the exemption despite holding fractional interests in multiple residential properties.
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According to Kuldip Kumar, this ITAT ruling highlights the importance of examining the facts and ownership of each property before determining eligibility for the exemption.
“Joint ownership of residential property, particularly between spouses, is common. It may arise from inheritance, estate planning, the desire to avoid future family disputes or the need to ensure that the surviving spouse can manage the property without unnecessary complications,” he adds.
“For taxpayers claiming exemption under Section 86 of the Income-tax Act, 2025 (corresponding to Section 54F of the Income-tax Act, 1961), these favourable judicial precedents may provide support where jointly owned properties are involved. However, the outcome will depend on the facts of each case and the judicial precedents applicable to it, and the possibility of the tax authorities taking a contrary view cannot be ruled out,” Kumar tells TOI.
“A legislative clarification specifying how jointly owned or fractional interests in residential properties should be counted for the purposes of this provision would provide greater certainty, reduce litigation and benefit taxpayers at large,” he adds.
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