Investments held in joint ownership? Here is what you should know

Many individuals have joint investments in mutual funds, equity shares, gold or real estate with parents, spouse and children. If you are one of them, then you should quickly review your Form 26AS. Form 26AS contains details of taxes paid, TDS/TCS, refunds issued, high-value transactions with banks, mutual fund houses and depositories, etc. Form 26AS can be obtained from the income tax e-filing portal or through TRACEs login.

The income tax department collects information of ‘Specified Financial transaction (SFT) as per the reporting requirements laid down under section 285BA. The transactions they require reporting include cash deposits and withdrawals, credit card payments, sale of bonds, mutual funds, stocks and many more, which exceed a specified threshold limit. Thus the income tax department gets details of transactions related to the sale of any capital asset from the mutual fund houses or depositories. In the case of real estates, stamp valuation officers provide information to the income tax department about the sale or purchase of the properties, including jointly held properties. 

As per reporting guidelines of CBDT, if a particular transaction is in the name of more than one person, it should be reflected in all the holders’ names. For instance, if husband and wife have jointly invested Rs 12 lakh in a mutual fund through a joint account, the sale of these investments will reflect in 26AS of both husband and wife. However, this amount should reflect only in the tax credit report of the primary holder. This Reporting requirement leads to duplicate reporting of the same transaction under all the joint holders’ PAN. The IT department sends income tax notice to the assessee in case of discrepancy between the ITR and the reported transactions in Form 26AS.

The dual reporting rules need to be altered as many taxpayers face the issue of transactions being reported under their PAN, which the primary owner of the transaction already declares. 

Mutual fund houses also are flooded with queries from their intimidated customers who have to spend time and money responding to the tax notices. AMFI (Association of mutual funds ) have raised this issue with the Central board of direct taxes.  

Addressing this issue is vital as with the new FY 2021-22, the income tax department has launched pre-filled ITRs in Budget 2021, which will contain all capital gain transactions of the individual taxpayers. Such dual reporting would continue to reflect in the pre-filled ITRs inviting income tax notices in case of a mismatch in joint owners. 

What is the solution?

Till CBDT takes up the issue for resolution, one can always do their part; if not avoid, at least be ready for such notice from the income tax department. 

One should review Form 26AS of self and family and see if any duplicate transactions have been reported. From AY 2021-22, pre-filled ITR would contain capital gain translation details; however, the assessee will have an option to modify the pre-filled forms. Also, the assessee should be ready for income tax notice due to the discrepancy, which can be reverted with the proof of primary source of investment and its taxability.  

For any clarifications/feedback on the topic, please contact the writer at jyoti.arora@cleartax.in