Dear All,

Has anyone handled the following fact pattern recently? I would appreciate your guidance based on practical experience, assessment history, or judicial precedents.

The Facts:

  • Original Property: Originally owned jointly by Husband and Wife (50:50).

  • Gift Deed: Husband gifted his 50% share to his wife in FY 2024-25 (covered under Section 47(iii)).

  • The Sale: The property was sold in FY 2025-26. At the time of sale, the wife was the 100% legal owner.

  • New Property Purchase: Prior to the sale, a new residential property was purchased. It was funded via a joint home loan (Husband & Wife) but registered exclusively in the wife's name.

  • Loan Repayment: The joint home loan was subsequently repaid using the sale proceeds of the original property.

Our Queries:

  1. ITR Reporting & Clubbing (Sec 64): How should the wife report this sale in her ITR?

    • Should she report 100% of the sale consideration and then manually reduce the capital gains clubbed in the husband's hands under Section 64(1)(iv)?

    • Or should she report only her original 50% share, with the husband reporting his 50% directly?

    • Is there a specific disclosure field in the utility to reconcile these two returns and avoid system-generated mismatches?

  2. Section 54 Exemption: Since the new property is registered 100% in the wife's name, but was funded via a joint loan repaid from the sale proceeds, can the husband claim Section 54 exemption against the capital gains clubbed in his hands?

  3. AO / Scrutiny Experience: Has anyone faced scrutiny on a similar setup? How did the Assessing Officer view the reporting and the Section 54 claim?

Any relevant case laws, recent assessment experiences, or practical workarounds would be highly appreciated.

Thank you!