# Income from Co-Owned Property [Section 26]

When a property is owned by two or more persons with definite and ascertainable shares, special treatment applies so they are NOT taxed as an Association of Persons (AOP).

## Core Rules

The co-owned property is NOT taxed as a group / AOP.
For computation, the property is first treated as if owned by a single owner; the income is computed normally, then each co-owner's share is added to their individual income.

## Interest Deduction Limit is PER CO-OWNER

For SOP/UOP where NAV = 0, the interest deduction ceiling (₹2,00,000 or ₹30,000) applies to each co-owner separately.
So two co-owners can each claim up to ₹2,00,000 — a key planning advantage.
Important: This SOP/UOP interest deduction is available only under the optional (old) tax regime.

## Open Point (discussed in class)

What if a co-owner also separately owns another fully-owned SOP/UOP? — The Nil-AV / per-assessee interaction must be analysed carefully.

Worked example

### Example 1

Example: Mr. X and Mrs. X jointly own a self-occupied house (50:50), NAV = 0. Total interest on the joint housing loan = ₹3,60,000 for acquisition (conditions satisfied), both under the optional regime.

Each co-owner's share of interest = ₹1,80,000.
The ₹2,00,000 ceiling applies per co-owner, so each can claim their full ₹1,80,000.
Combined deduction = ₹3,60,000 (versus only ₹2,00,000 if it were a single owner).

⚠️ Common exam mistakes

Taxing co-owned property income as an AOP — Section 26 requires apportioning income to each co-owner individually (when shares are definite).
Applying one combined ₹2,00,000 interest ceiling to the whole property — the limit is per co-owner.
Allowing the SOP interest deduction to co-owners under the default regime — it is available only under the optional regime.

Reference: Section 26 — Income-tax Act, 1961

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