Transfer of Property in India
The Transfer of Property Act 1882 is an Indian legislation which regulates the transfer of property in India. It contains specific provisions regarding what constitutes a transfer and the conditions attached to it.
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There are two modes of property transfer in India - a Voluntary Transfer or an Involuntary Transfer.
At the point when the owner of property transfers it willingly, it is voluntary transfer. This might be done for consideration, e.g. by sale or a lease, or transfer by gift or by will.
Involuntary transfer or an Involuntary Alienation (Alienation means the transfer of property, such as mortgages, gifts and sales) happens when the court attaches the property of a person. This mode may likewise alienate the assets of the joint family or undivided interest of a co-partner in such estate.
You can acquire ownership of an immovable property in the following ways:
1. Sale Deed - by selling or purchasing the property
This is the most popular way of transferring the property. If you hold a property and you would like to sell it outright for a consideration (sale value) then execution of sale deed can be considered.
The registration of sale deed or transfer deed is mandatory and once the sale deed is registered in Sub-Registrar office, the ownership gets transferred to the new owner.
Stamp duty and registration fee have to be paid to register the SALE DEED. The fees can vary from State to State.
If you are the seller of the property then you have to pay the applicable taxes on Capital Gains.
2. Gift Deed
A gift can be in the form of cash, movable or immovable property, for example, money, a house, shares, jewellery etc that is received without consideration, or simply an asset received without making a payment against it and is a capital asset for the ‘Recipient’.
If you would like to gift the property to any of your blood relatives, a Gift deed can be used. In case of immovable property, it is mandatory to register the Gift Deed as per Section 17 of the Registration Act, 1908. You can gift the property to non-family members too but the stamp duty or registration fee can be higher than in the case of a gift to a family member.
This kind of transfer is irrevocable. Once you gift the property, it belongs to the beneficiary (receiver of gift) and you cannot reverse the transfer or even ask for monetary compensation.
If you receive a gift (movable or immovable) from a relative then no tax will be levied. However, if you receive a gift (movable or immovable) from a non-relative, relevant taxes will be applicable.
As per the provision of taxation of gifts, any Gift received from any person on the occasion of the marriage is not liable to income tax.
Gifts received under a WILL or inheritance is tax-exempted.
3. Settlement Deed or Partition Deed - through a settlement or partition of properties
Partition Deed is generally executed by the co-owners or joint owners of a property
In case of Settlement Deed, however, the property is owned by a third person and is settled in favour of a third party beneficiary who does not have any previous interest in the said property and the specific share of the beneficiary is as per the wish of the settler.
The Settlement Deed is a non-testamentary document which becomes operative immediately and is irrevocable.
The deed of settlement attracts stamp duty and registration of the settlement deed is compulsory. The stamp duty payable is similar to that payable on a sale deed, i.e. based on the market value of the property.
As long as no transfer (re-sale) takes place, the parties to a (family)settlement or Partition won’t be subject to capital gains tax in respect of the profits derived from their share of the property.
4. Relinquishment Deed - through relinquishment of ownership in a property
If there are multiple owners of a property, and if one of the co-owner wishes to transfer his/her rights in the property to another co-owner(s) then this can be done through the execution of RELINQUISHMENT DEED.
The transfer of property through Relinquishment deed can be for consideration or without consideration (without any exchange of money). Like gift deed, this transfer is also irrevocable.
The Relinquishment deed has to be registered and applicable stamp duty has to be paid. The stamp duty has to be paid only on the portion of the property that is being relinquished and not on the total value of the property. Generally, the applicable fee is similar to that of a Gift Deed.
The tax on capital gains (like in Sale Deed case) is applicable but only on the portion of the property that you relinquish.
There is a very thin line of difference between Relinquishment deed and Release Deed.
Relinquishment Deed instrument is commonly used when a person dies intestate (without leaving a WILL) and his/her siblings inherit the property. For example – If the father of two children who owns a real estate property dies without leaving a WILL then his two children inherit the property. If one of the siblings wishes to relinquish his/her share in the property then he/she can execute Relinquishment deed in favour of his/her sibling.
Whereas in the case of Release Deed, let’s say if both partners mutually purchased the property and one of the partners wishes to release his share from the property then in that case Release Deed can be executed.
5. Through inheritance or WILL
You can acquire a property through inheritance or a Will deed.
If a person dies intestate then the properties are transferred as per the Law of Succession.
A Will can be revocable by the Testator during his/her lifetime. So, the beneficiaries of a Will get the ownership rights in a property only after the death of the Testator.
After the death of the testator, the person claiming through the Will or inheritance need not Register the property in his name.
However, he/she must apply to the concerned local civil authorities with the copy of the Will, Succession Certificate (Legal-heir Certificate) and death proof (death certificate) for getting the mutation of the property done in his/her name.
After the death of the owner of a property his heirs, such as wife, children i.e. male and female, married or unmarried may, as per respective personal law, get the Patta/Khata transferred on the production of the death certificate of the owner with details of property held by him.
Registration of WILL DEED is not compulsory.
When you receive a property through inheritance or WILL DEED, there will be no tax implications. However, if you re-sell the property then normal capital gain taxation rules are applicable for the inheritor.
If you require any clarification or wish to proceed with the transfer of your property then please contact us.