Transfer of Property in India
The process of registration for a property transfer in India involves payment of stamp duty and other registration costs.
Indian NRI Property Transfer
Transferring agricultural, residential or commercial real estate property in India falls under the scope of the relevant state government where the property is situated. Hence, the process of executing an NRI property transfer is not the same across India as each state has different statutes, regulations, and taxes that govern such transfers.
Unlike other countries where the transfer of a real estate asset is automatic, the process for transferring NRI property in India is time-consuming due to the sheer amount of legal formalities involved.
Ownership transfer of Indian NRI Property
Transfer of property ownership normally occurs in one of two different ways – voluntary transfer or involuntary transfer.
A voluntary transfer is when the rightful owner of a property willingly transfers their property, which can be done in the following ways – by gift; for consideration, for example, by sale, mortgage, lease or exchange; or by will.
An example of an involuntary transfer or involuntary alienation can be when the court seizes the property of an individual. This mode of transfer may also transfer the assets of the joint family or the undivided interest of a co-partner in such property.
Which property can NRIs transfer in India?
An NRI just like any other Indian resident or citizen can transfer any type of immovable property in India, whether the property is residential or commercial. An NRI can transfer any property to their family as well as relatives. As per the Indian Succession Act, 1925, an NRI possesses the right to ask for their share in their ancestral properties from their families or relatives. If an NRI is unable to travel, they can appoint a Power of Attorney to transfer their property on their behalf.
An NRI can also transfer property to another NRI but is subject to the relevant regulations. For example, approval from the Reserve Bank of India (RBI) is mandatory in case the transfer is in favour of a foreign citizen, who is a Non-Resident Indian. However, NRIs are not permitted to purchase agricultural lands as well as farmhouses under Indian Law.
Ways NRIs transfer property in India
Immovable real estate property ownership in India can be transferred through different methods. From a simple sale to a gift deed to a relinquishment deed, options vary from situation to situation. The following are the six most common ways in which one can transfer property ownership in India:
Through a valid Will
A Will is a testamentary document that becomes operational only after the demise of its owner. The beneficiary of the property through a will is not bound to pay any taxes. A will can be revoked or replaced any number of times during the lifetime of the person drawing it up. After the death of an individual, the successor needs to apply to the concerned civil authorities with a copy of the will, succession certificate, and death certificate for completing the property transfer process.
Inherit property through natural succession under Indian Law
In case a person dies intestate (without making a Will) then the property gets transferred according to the Laws of Succession as prescribed under Indian law. Please see our detailed post regarding NRIs inheriting property in India for more information.
Another popular way of transferring property ownership is by ‘gifting’ the property using a gift deed. As per Section 122 of the Transfer of Property Act, 1882, gifting a property must be done voluntarily. A gift deed is an economical mode of transferring the ownership of property. And where an NRI wishes to gift their property to blood relatives, then a gift deed can be utilized. A gift can be cash or movable property or immovable property.
When compared to a sale deed, it is a better method as there are no taxes to be paid if the gift is made to relatives. However, stamp duty and registration charges will have to be paid to make the transfer legal. Also, this kind of transfer is irrevocable. In case of a gift made to non-relatives over Rs 50,000, the recipient will have to pay taxes on the gift received.
Partition Deed or a Family Settlement Deed
An NRI partition deed is executed by the co-owners or joint owners of a property when an order of the court or the local revenue authority has to be executed. On the other hand, a family settlement deed is executed by family members in the undivided joint family property.
Relinquishment Deed or a Discharge Deed
In a situation where there are 2 or more joint owners of an NRI property and one owner wishes to transfer their rights in the property to another existing owner then this can be executed by a relinquishment deed, otherwise known as a discharge deed. The transfer of property via the relinquishment deed can either be for consideration or be without consideration i.e. without the exchange of money.
If an NRI or a Foreign national such as a UK, US or Canadian national owns an Indian property and wishes to sell their share outright, then execution of a sale deed otherwise known as a transfer deed is a suitable option. However, if the NRI seller is making any profit, he will have to pay the capital gains tax along with other applicable taxes. The holding period considered for such sale is not the date of inheritance but the actual date of purchase of the property. Thus, despite being the most common and straightforward method, it is not really a cost-effective way of transferring a property.
NRI Property Transfer Documents
The documentary requirements for transferring Indian property will depend on the method of transfer and as mentioned these requirements will vary from state to state. Without the proper documentation, a property transfer cannot be executed, in which case the relevant documents must be obtained from the local authorities where the property is located such as the local Registrar’s office, Revenue department, local courts, etc.
It is mandatory to register the instrument of transfer, such as a sale deed or a gift deed, with the appropriate local government authority for it to become valid and enforceable. This process of registration for a property transfer in India involves a payment of stamp duty and other registration costs that are based on a percentage of the commercial value of the real estate asset and these rates vary from one state to another.
In instances where the property is being transferred through a will or natural succession, there is a strict requirement to prove that the legal heirs or beneficiaries of the property are indeed the rightful owners of the property. Depending on your circumstances, some of the documents that you may be required to furnish when transferring property in India are:
- The property title deed
- The sale-purchase deed or transfer deed;
- A registered or unregistered will;
- A certificate of succession in situations when there is no will;
- Certificate of encumbrance;
- A khata or a revenue document;
- The death certificate of the deceased owner;
- Residence details of the deceased owner;
- Detailed information about the property that is supposed to be transferred;
- The death certificate of the deceased person;
- Details of the residence of the deceased;
- Proof of identification and residence of the legal heir;
- Proof of absence of any obstruction towards the grant of the succession certificate.
What is an encumbrance certificate? An encumbrance certificate is a compulsory document in transactions of property as proof of freehold ownership. An encumbrance certificate registers all the transactions that occur in connection with an immovable property be it a sale, gift, lease, mortgage, partition, release, etc.
What is a Khata document? A khata is a typical official record of the revenue documents which includes the evaluation of a property such as the size of the property, location, areas under the construction, information of the owner, etc. Apart from this, a khata is also a type of identification of the person who is essentially liable to pay property tax for the property concerned.
Transfer Indian property from the UK or overseas
Typically, NRIs, OCI or Foreign Nationals such as a UK, US or Canadian Citizens who do not have a reliable source of information will find it difficult to navigate the transfer of Indian property process from abroad. In which case it is highly recommended that you seek professional legal advice from a trusted firm such as Whytecroft Ford to advise you with the process.
An individual can transfer their Indian property from the UK or anywhere abroad if they are unable to travel due to a particular reason such as ill-health, old age or travel restrictions during the coronavirus pandemic. To begin the process of transferring Indian property from overseas, the NRI must execute a valid Power of Attorney. NRIs and OCI individuals are familiar with the PoA document as this allows them to grant powers to a trusted individual to act on their behalf where their personal presence is usually required. In addition to sending a Power of Attorney to India from abroad, more documents will be required to complete the transfer process.
How long does it take to transfer property in India from the UK or overseas?
Transferring an immovable property in India can turn out to be a complicated process, this becomes more evident when a person resides abroad – due to the increase in legal formalities.
Circumstances related to lack of time, inability to travel, lack of relevant documents can also increase the risk of situations such as illegal possession of land, illegal transfer of apartments or even illegal sale of the property. Improper documentation or legal disputes amongst successors or beneficiaries can complicate and prolong the transfer process from a few months to even several years.
However, where there are no problems or hindrances involved, typically, a property transfer may take between 4-8 weeks or more.
Problems with Indian property transfers from the UK
Some issues that cause delay and are common when transferring Indian property from abroad are:
- Lack of documentation, such as title deed.
- Invalid power of attorney due to improper execution.
- The attorney taking undue advantage of their powers.
- Incorrect names on documentation.
- A legal dispute with the occupant or other legal heirs.
- Debt on property.
NRI Property Transfer: How the WF Team can help
Without proper guidance, transferring immovable property such as an apartment, house or land from abroad can be quite challenging for overseas Indians. However, to manage and protect the real estate asset India, it is important to have your property transferred and ownership records updated. Once the property transfer is completed the new owner’s name gets updated in the relevant Government records.
Our experienced team offers professional and expert legal advice in relation to transferring Indian property of NRIs. We also offer representation in certain select areas of India. To find out more, contact our team on 02087575751 or use our free assessment form and a member of our team will get in touch with you.
If you have any questions regarding any of our services, feel to reach out to our team.