How Joint Owners Can Legally Share Property Sale Proceeds?

Owning a home has always held a special place in Indian families. It’s not just a financial investment but a symbol of stability, togetherness, and legacy. Just as traditions and values are passed down across generations, buying a home under joint ownership, often with a spouse, parent, or sibling, has become a common practice.

While joint ownership offers many advantages like shared financial responsibility, better loan eligibility, and tax benefits, the real complexity begins when the jointly owned property is sold. Many families struggle with questions like: 

How should the sale proceeds be divided? 

What if the ownership share is not documented? 

What are the tax implications?

In this guide, I break down the complete process of how to split property sale proceeds in joint ownership in a legally sound and conflict-free way.

Understanding Joint Ownership

Before discussing how to divide the sale proceeds, it’s important to understand the different forms of joint ownership that exist in India. Each type has its own rules related to inheritance, rights, and transferability, which also impact the division of proceeds.

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1. Tenancy in Common

• Co-owners can hold equal or unequal shares.
• A co-owner can sell, transfer, or will their share independently.
• After the death of a co-owner, their share goes to their legal heirs, not the other co-owners.

2. Joint Tenancy

• All co-owners hold equal shares and equal rights.
• On death, the share passes on as per succession laws or the owner’s will.
• If there is no specific agreement, inheritance follows standard legal provisions.

3. Coparcenary Property

• Applies to ancestral property.
• Both sons and daughters, married or unmarriedhave equal rights.
• Shares fluctuate with the birth or death of family members.

4. Hindu Undivided Family (HUF)

• Managed by a Karta (usually the eldest member).
• All members have rights in the property.
• Division of proceeds depends on each coparcener’s rightful share.

5. Tenancy by the Entirety (For Married Couples)

• Available only to spouses.
• Each spouse has equal rights and ownership.
• Upon the death of one spouse, the surviving spouse becomes the sole owner.

Joint ownership may end due to mutual agreement, partition, divorce, or the death of a co-owner.

How to Determine Each Co-Owner’s Share

In Indian property law, if there is no written agreement specifying the ownership share, the law assumes equal ownership.
So if two people purchase a home together, each is presumed to own 50%.

However, shares can differ based on:

• Individual financial contribution
• Terms mentioned in the sale deed
• Co-ownership agreement
• Family settlement deed
• Gift deed

A properly drafted co-ownership agreement can avoid future conflicts. It should clearly state:

• Who paid how much
• Ownership percentage
• Responsibilities
• Dispute-resolution mechanism
• Procedures if one co-owner wants to exit

During a sale, the ownership share mentioned in the sale deed becomes the primary basis for splitting the sale proceeds.

Transfer of a Jointly Owned Property

If any co-owner wants to exit joint ownership, they have a few options:

• Seek partition (physical division)
• Sell the property jointly and split the proceeds
• Transfer their share via:
• Release deed
• Gift deed
• Will
• Family settlement

In joint tenancy, consent from all co-owners is required for transfer.
In tenancy in common, a co-owner may transfer their share independently unless the agreement says otherwise.

Legal Process to Sell a Jointly Owned Property

Selling a jointly owned property follows the same steps as selling individually owned property, but with a few additional requirements.

1. Obtain Written Consent of All Co-Owners

Without unanimous consent, the sale cannot proceed and may lead to future legal disputes.

2. Confirm Ownership Shares

If no document proves unequal sharing, the law assumes equal distribution.

3. Draft the Sale Deed Carefully

The deed must clearly mention:

• Names of all co-owners
• Their ownership share
• How the sale proceeds will be split
• Payment structure

4. Use Power of Attorney if Needed

If a co-owner cannot be physically present, a registered POA can authorize someone to sign on their behalf.

5. Signing and Registration

All co-owners (or their POA holders) must sign.
The document must be properly witnessed and registered.

6. Fulfill Tax Responsibilities

Each co-owner is responsible for reporting their share of income and paying applicable taxes.

How to Split Property Sale Proceeds in Joint Ownership

This is the most important part of the entire process.
Sale proceeds are divided strictly as per each co-owner’s documented ownership share.

Example:

If a ₹1 crore property is jointly owned by three people in the following shares:

• Owner A: 40%
• Owner B: 40%
• Owner C: 20%

They will receive:

• A → ₹40 lakh
• B → ₹40 lakh
• C → ₹20 lakh

If shares are not documented, the law assumes equal distribution.

Tax Implications When Selling Jointly Owned Property

1. TDS Deduction (Section 194-IA)

• 1% TDS applies if the property value exceeds ₹50 lakh.
• In joint ownership, TDS is deducted proportionately based on each owner's share.
• If an individual's share is less than ₹50 lakh, they are not required to pay TDS.

2. Capital Gains Tax

Each co-owner pays capital gains tax on their share.

Formula:
Capital Gains = Sale Price – Indexed Cost – Transfer Expenses

Types of gains:

• LTCG: Held for more than 24 months → 20% with indexation or 12.5% without indexation
• STCG: Held for less than 24 months → Taxed as per income slab

3. Tax Exemptions (Per Co-Owner)

• Section 54 – reinvest in another house
• Section 54EC – invest up to ₹50 lakh in bonds
• Section 54F – reinvest when selling non-residential property

Recent ITAT Ruling:
A married couple selling two houses and jointly buying one house can still claim the Section 54 exemption.

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Disputes in Joint Ownership & How to Avoid Them

Common disputes arise from:

• Unequal contributions
• Disagreement on sale timing
• Conflict over valuation
• Dispute over division of proceeds

Solutions:

• Mediation with a neutral third party
• Civil suit
• Partition suit
• Injunction to prevent sale
• Proper documentation from the start

Co-owners may also challenge an unauthorized sale in court.

Expert Viewpoint

Selling a jointly owned property is not complicated, it’s the lack of documentation and communication that creates problems.
Understanding your rights under joint ownership helps prevent conflicts and ensures a fair, transparent distribution of the sale proceeds.

Whether you are purchasing together or planning to sell, a properly drafted agreement and legal guidance can protect everyone’s interests.

Conclusion

Joint ownership offers many financial and emotional benefits, but selling such a property requires clarity, documentation, and legal understanding. From determining ownership shares to handling tax implications, every step must be transparent and well-documented.

With clear communication and professional guidance, splitting property sale proceeds in joint ownership becomes a smooth, dispute-free process.