In India, adding a family member's name to a property title is a common practice.
Whether it is a husband adding his wife, a parent including their child, or even a close friend stepping in as a joint owner, the financial dynamics are often one-sided. Often, the primary owner pays the entire purchase amount, while the secondary owner contributes nothing financially.
Historically, these arrangements remained quietly between the families and the property registrars, rarely drawing the attention of the tax department.
Ashish Karundia, a practising chartered accountant and author, noted that the tax department today receives information on property transactions from registrars and TDS filings, and the joint ownership raises a fairly obvious question — “If a person has acquired a property, does their tax return show the financial capacity to make that investment?”
If a property is registered in the names of A and B but funded entirely by A, the legal interpretation can vary significantly. Karundia explained that this arrangement could represent one of four situations:
Each of these scenarios triggers completely different tax and legal consequences:
According to Ashish Karundia, if A intends to gift a share of the property to B, B becomes a genuine co-owner despite making no financial contribution. However, he cautioned that establishing ownership does not end the tax discussion.
Under current tax laws, if a property share is gifted to a spouse or a minor child, the parties must carefully consider how any income or loss generated by the property will be taxed.
Alternatively, the arrangement could be structured as a financial advance.
Karundia explained that if A loans money to B to acquire a stake in the property, B remains the legal owner of that interest. He emphasised that the person funding the purchase is not automatically the owner.
In the case of a loan, A's legal right is strictly to recover the money advanced, not to claim the property itself simply because it was financed.
The most severe legal complications, the CA said, arise when B’s name is added to the property documents strictly as a "name-lender," with no intention of granting them actual ownership.
Karundia warned that if B has neither contributed financially nor received the funds as a genuine gift or loan, the transaction could attract scrutiny under the Benami Transactions Act.
While not every transaction involving a third-party financier is automatically classified as benami, Karundia pointed out that the law provides specific exceptions for certain family arrangements.
However, he advised against treating these exceptions as blanket protections, noting that they do not cover all relatives—for instance, holding a property in a cousin's name would not qualify for the exemption.
