Property Co-ownership Provisions for Rental Income: Section 26 of Income Tax Act, 1961 and Clause 24 of Income Tax Bill, 2025 Clause 24 Property owned by co-owners. - Income Tax Bill, 2025

Clause 24 Property owned by co-owners. Income Tax Bill, 2025 1. Introduction This analysis examines the evolution of provisions relating to the taxation of income from properties owned by co-owners, comparing Section 26 of the Income Tax Act, 1961 with Clause 24 of the proposed Income Tax Bill, 2025 . The provisions are fundamental to determining how co-owned properties are taxed and how the income is allocated among co-owners. 2. Objective and Purpose Both provisions aim to: Establish clear guidelines for taxing income from co-owned properties Prevent double taxation Ensure fair distribution of tax liability among co-owners Provide clarity on the treatment of co-owners vis-`a-vis association of persons 3. Detailed Analysis 3.1 Structural Changes The new Clause 24 has been restructured into two distinct sub-clauses, making it more organized and easier to comprehend compared to Section 26 . While the essence remains similar, the language has been simplified and modernized. 3.2 Scope of Application Section 26 (Current Act): Specifically mentions property consisting of buildings or buildings and lands appurtenant thereto Focuses on physical property structure Clause 24 ( New Bill ): Uses broader term property without specific reference to buildings or appurtenant lands Adopts a more inclusive approach to property types 3.3 Key Components Analysis 1. Co-ownership Criterion: Both provisions maintain the fundamental requirement of: Multiple owners Definite and ascertainable shares 2. Assessment Approach: Both provisions explicitly exclude assessment as an association of persons Individual assessment principle is retained 3. Income Computation: Section 26 : References Sections 22 to 25 for income computation More specific in cross-referencing Clause 24 : Simplified reference to this Chapter More flexible approach to income computation 3.4 Relief Provisions against Self Occupied Property. Section 26 (Explanation): References sub-section (2) of section 23 Complex language in explaining relief application Clause 24(2) : Direct reference to section 21(6) Clearer language regarding individual entitlement to relief 4. Practical Implications 4.1 For Taxpayers: Simplified understanding of their tax obligations Clearer determination of individual shares More straightforward relief calculation 4.2 For Tax Administrators: Streamlined assessment process Reduced ambiguity in interpretation More efficient tax collection mechanism 5. Comparative Analysis 5.1 Improvements in New Provision: Simplified language Better structured format Broader property coverage More direct relief provisions 5.2 Retained Elements: Basic principle of separate assessment Requirement of definite shares Individual taxation approach 6. Conclusion Clause 24 of the Income Tax Bill, 2025 , represents a modernized and simplified version of Section 26 of the Income Tax Act, 1961 . While maintaining the core principles, it introduces clearer language and structure, potentially leading to better compliance and easier administration. Full Text : Clause 24 Property owned by co-owners.