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Property, Sale

Selling your share of a disputed or jointly-owned property

The property is co-owned or caught in a family dispute, and you want to sell your share but do not know how the tax works while the title is unsettled.

The property is not cleanly yours to sell whole. It is co-owned with siblings or other family, or there is a dispute or a suit hanging over the title, and you want to release your share, often because you are abroad and cannot keep managing it. You are unsure whether you can even sell your share, how the capital gain is worked out when you only own part, and whether the pending litigation changes when you are taxed. The legal side and the tax side are separate, and the tax side is more settled than the mess around the title suggests.
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Last reviewed: 26 July 20268 min readReviewed by Preetesh Maloo, CA

The short answer

On the legal side, a co-owner can generally sell their own undivided share of a property, and the buyer steps into your shoes as a co-owner. On the tax side, each co-owner is taxed separately on their proportionate share of the gain, with the sale price, cost and expenses split by ownership share (Section 45 read with Section 48). Pending litigation or a clouded title does not by itself defer the tax; the gain arises in the year your share is actually transferred. A lis pendens ties the buyer's title to the outcome of the suit but does not change your tax year. If a completed sale is later set aside, that is a separate, later event.

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Related situations

You can usually sell your share, and you are taxed only on your share

On the legal side, co-ownership does not lock you in. A co-owner can generally transfer their own undivided share of a property, and the buyer takes that share and steps into your position as a co-owner (Section 44 of the Transfer of Property Act). That is a legal matter your conveyancing lawyer confirms for the specific property and its title.

On the tax side, you are taxed only on what you actually own. Each co-owner's capital gain is computed separately on their proportionate share, with the sale consideration, the cost of acquisition and the expenses all split by ownership share (Section 45 read with Section 48). So if you own a third, you are taxed on a third of the gain, worked on a third of the price and a third of the cost, and the other co-owners are taxed on theirs.

Litigation does not, by itself, defer the tax

A common assumption is that while the property is under dispute nothing is taxable. That is not how it works. The gain arises in the year your share is actually transferred (Section 45); a clouded title or a pending suit does not defer the tax if a transfer has in fact happened.

Where a buyer is willing to take a share that is subject to a suit, a lis pendens notice binds their title to the outcome of that litigation, meaning they take the risk of the result. But that is about the buyer's title, not your tax year: your gain still falls in the year you transferred your share. The genuine exception is timing, if no transfer has yet occurred because the dispute is blocking any sale, then there is no gain to tax yet; and if a completed sale is later undone by the court, that reversal is a separate later event to be dealt with when it happens.

The NRI TDS on a co-owned sale

Because you are a non-resident co-owner, the buyer must deduct TDS under Section 195 on the consideration for your share. Where the property is co-owned by a mix of a non-resident and residents, the buyer deducts under Section 195 on the non-resident's share and under the resident-property rule on a resident's share, so the deduction is not one blanket figure but is split by owner. Getting that split right at the buyer's end is where co-owned NRI sales most often go wrong.

A practising CA scopes your share, computes your portion of the gain, applies for a Form 13 lower-deduction certificate so the buyer withholds on your real gain rather than the gross value of your share, and carries it into your return. The title dispute itself is handled by your lawyer; the CA keeps the tax on your share clean and correctly timed alongside it.

What's involved

What the CA actually does

  1. 1

    We compute your share of the gain

    We split the sale price, cost and expenses by your ownership share and work the gain on your portion only, so you are not taxed on the whole property.

  2. 2

    We fix the correct year

    We establish when your share was actually transferred and report the gain in that year, so pending litigation does not create a wrong-year filing.

  3. 3

    We get the TDS split right

    We make sure the buyer deducts under Section 195 on your non-resident share, separately from any resident co-owner's share, and we file a Form 13 so it is on your real gain.

  4. 4

    We work alongside your lawyer

    The title dispute is a legal matter for your advocate; we keep the tax on your share correct and timely, and reconcile it into your return.

What to have ready

Documents you'll typically need

  • The co-ownership documents showing each owner's share
  • The sale deed or agreement for the share being sold
  • Any court papers relevant to the dispute, for the timing
  • Cost records for the property, to apportion by share

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next, how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 46 countries.

References on this page

  • Section 45, capital gains taxed in the year the transfer takes place
  • Section 48, sale consideration, cost and expenses apportioned to each co-owner's share
  • Section 195, TDS on the share sold by a non-resident co-owner
  • Section 44, Transfer of Property Act. A co-owner may transfer their undivided share

Frequently asked questions

Common questions

Generally yes on the legal side: a co-owner can transfer their own undivided share, and the buyer steps into your position (Section 44 of the Transfer of Property Act). Your conveyancing lawyer confirms it for the specific title. On the tax side, you are then taxed only on your share of the gain.

Each co-owner is taxed separately on their proportionate share. The sale price, cost and expenses are split by ownership share (Section 45 read with Section 48), so if you own a third you are taxed on a third of the gain, and the other owners on theirs.

No, not by itself. The gain arises in the year your share is actually transferred; a pending suit does not defer the tax if a transfer has happened. A lis pendens binds the buyer's title to the outcome but does not change your tax year. If no transfer has occurred because the dispute blocks any sale, there is simply no gain yet.

The deduction is split by owner. The buyer deducts under Section 195 on the non-resident co-owner's share and under the resident-property rule on a resident's share, rather than one blanket figure. A Form 13 certificate on your share brings your deduction down to your real gain.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

TDS rate when buying property from an NRI

Right now: 12.5% plus surcharge and cess on LTCG

Where it works differently

The gain is short-term
TDS is at the applicable slab rate, effectively 30% plus surcharge and cess for most NRI sellers.
s.195 requires deduction at 'rates in force' for the actual character of the income.
No lower-deduction certificate is obtained
TDS applies to the ENTIRE SALE CONSIDERATION, not to the gain.
s.195 operates on the sum paid unless the AO determines otherwise. This is the whole commercial case for Form 13 / Form 128.
There are joint NRI sellers
TDS is deducted separately against each seller's PAN in their ownership proportion.
Rule 37BA. Deducting entirely against one PAN strands the other's credit.
The buyer deducts 1% under s.194-IA
Wrong section. The buyer becomes an assessee-in-default under s.201 for the shortfall plus 1% per month interest and penalty under s.271C.
s.194-IA applies only where the seller is a RESIDENT.

Commonly got wrong

  • TDS on property purchase is 1% over Rs 50 lakh. That is s.194-IA, for RESIDENT sellers only. For a non-resident seller it is s.195 at the full capital-gains rate, with no threshold.1% applies only if the seller is a resident. NRI seller means s.195 at 12.5% plus surcharge and cess on the whole consideration unless a certificate is obtained.
  • The buyer files Form 26QB. 26QB (now Form 141) is for s.194-IA. An NRI-seller purchase needs a TAN and Form 27Q (now Form 144).Buying from an NRI, you need a TAN, you deduct under section 195, and you file Form 27Q (Form 144 from 1 April 2026). Form 26QB is only for resident sellers.

Related

If this matched your situation, these go further

Dividing inherited property among co-heirs: is the partition taxed?Someone is occupying your Indian property: what the 12-year clock really meansWhen your property sale spans two financial years, which year is the gain taxed?Getting back excess TDS the buyer cut on your property saleForm 13 lower-TDS certificate (property sale)NRI ITR filing (we file for you)Inherited Indian property taxProperty sale TDS calculatorCapital gains calculator

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