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Procedure of Transfer of Immovable Property

There are several modes of transferring ownership of immovable property in India. These include sale, gift, lease, mortgage, and relinquishment. For a sale, a stamped and registered sale deed is required, which may incur long or short-term capital gains tax liability for the seller depending on the holding period. A lease requires registration if over 11 months and specifies the tenant and landlord rights and responsibilities. A mortgage involves transferring property rights to a lender as security for a loan. Gift deeds must be registered to validly transfer property as a gift. Relinquishment involves legally transferring inheritance rights to another legal heir. Proper registration and payment of applicable stamp duties are required to record all property transfers.

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Amit Bidwai
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122 views

Procedure of Transfer of Immovable Property

There are several modes of transferring ownership of immovable property in India. These include sale, gift, lease, mortgage, and relinquishment. For a sale, a stamped and registered sale deed is required, which may incur long or short-term capital gains tax liability for the seller depending on the holding period. A lease requires registration if over 11 months and specifies the tenant and landlord rights and responsibilities. A mortgage involves transferring property rights to a lender as security for a loan. Gift deeds must be registered to validly transfer property as a gift. Relinquishment involves legally transferring inheritance rights to another legal heir. Proper registration and payment of applicable stamp duties are required to record all property transfers.

Uploaded by

Amit Bidwai
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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PROCEDURE OF TRANSFER OF IMMOVABLE PROPERTY

Transfer of property is an act of conveying property from one person to


another, in present or future.
According to section 8 of the Transfer of Property Act 1882 (The Act), by
transferring property, transferor transfers all rights in a property.

Various Modes:

There are various modes of transferring ownership of property:

permanently by
1) relinquishment
2) sale
3) gift;
and temporarily by way of
4) mortgage
5) lease and,
6) leave and license agreement.

Sale:

Under Sec 54,


The ​sale is a transfer of ownership by a deed (sale deed/transfer deed) for
a price, paid or promised or part paid and part promised.
The sale deed is compulsorily required to be
stamped (stamp duty) and registered (before a Sub-Registrar) and is for
consideration.

Sale of property may result in long term, or short term capital gains tax
liability, depending upon the period of holding of the property. This tax is
payable by the seller of the property, and there are provisions under the
Income Tax Act 1961 to save long term capital gains tax. Also, the tax
implications are different when you have an under construction property
and when you receive the possession of it. Also, the purchaser of a
property is required to withhold 1% tax and deposit it with an authorized
bank.
Lease:

Sec 105 of the Act defines ​lease as a transfer of the right to enjoy a
property, for a certain period, express or implied, in consideration of a price
paid or promised, money or any other thing of value, to be rendered
periodically or on such occasions.

Section 17 of the Registration Act, 1908 mandates registration of the rental


agreement, if the lease period is for more than 11 months.
In all other cases, oral agreement accompanied with the delivery of
possession is sufficient.
The registration process involves payment of stamp duty and registration
fees.
The lease deed should clearly specify the purpose of the tenancy whether
residential or commercial.
The contract should also clearly mention the provision for premature
termination of the lease.
Under a lease agreement, the tenant has exclusive possession of the
property.
A tenant can sub-let the premises to a third party unless prohibited or
restricted under the rental agreement.

Mortgage:

Sec 58 of the Act defines ​Mortgage as the transfer of interest in the


specific immovable property by way of a mortgage deed or deposition of
title deeds for securing payment of a loan.
The owner of the property creating a lien on an immovable property to the
lender is the mortgagor. The lender is the mortgagee.

In a mortgage, the mortgagor may either deposit title deeds of immovable


property to the lender or his agent with intent to create security or execute
a mortgage deed.

If there is a debt and if the debtor deposits title deeds with an intention that
the title deeds shall be security for the debt, then by the mere fact of
deposit of those title deeds, a mortgage comes into being.

A mortgage by deposit of title deed does not require registration.


Sometimes, a memorandum accompanies the deposit of title deeds to
evidence the purpose of deposition of title deeds by way of an aide memoir.
Though a mortgage by deposit of title deeds can be created by a mere
deposit of title deeds without any written contract between the parties, in
case the bargain or contract is reduced to writing, then it has to be
registered.

Gift Deed:

Under section 122 of the Act, one can transfer immovable property through
registered​ gift deed​.
The immoveable property is transferred voluntarily without any
consideration.

To make the transfer valid it is mandatory to register a gift deed with the
sub-registrar as per section 17 of the Registration Act, 1908, and
section 123 of the Transfer of Property Act.

A donor does not have the right to revoke or cancel the registered deed at
a later stage unless there is a specific clause mentioned in the deed.
Section 126 of the Act provides for a situation wherein a donor can revoke
a gift deed.

For instance, if the property was gifted so that the recipient can reside in it,
upon the death of the recipient, the property will get transferred back to the
donor if she is alive, else to the heirs of the recipient.

The Income-Tax Act 1961 specifies that capital gains arising out of a gifted
property to blood relations are exempted from tax. However, income
accrued from the gifted asset may be taxable.

Relinquishment:

Relinquishment is surrendering inherited or parental rights for another


“legal heir”/ “another collateral” in the same property.
In simple terms, relinquishment is a family arrangement where one legal
heir surrenders his share in the property with or without monetary
consideration for another legal heir.

The relinquishment deed cannot be executed for another person who is not
a legal heir.

The relinquishment of property results in taxation of capital gains and on


the basis of time horizon of holding the asset the gains are derived and
taxes are calculated.
Registration of transfer of ownership of property
Once a property has been transferred by way of relinquishment, sale, or gift
deed in the “name” of the recipient. It is also important to have the transfer
recorded in the municipal records by way of ​mutation​.

Stamp duty on transfer is payable as per applicable state laws. The stamp
duty on gift deed may or may not be equal to the general stamp duty you
pay on selling or relinquishing the property. It is different for different states
in India.

Circle rate is the minimum price at which stamp duty is payable in case of
transfer of immovable property. These rates are an indicator of likely prices
of properties in various areas. Circle rates differ within cities in the same
state, and among various localities of a city.

Where the actual price paid by a buyer is less than the circle rate, stamp
duty is generally paid on the circle rate. However, a Sub-Registrar is
required to allow registration of property even when the stamp duty paid is
lower than the circle rate. However, it can impound the document and
adjudicate proper stamp duty.

The buyer can provide proof of the fact that the actual transaction is at the
value stated in the deed, and that is the correct market value.

State governments collect stamp duty and registration charges on the


declared value or the circle rate, whichever is higher, on the property being
transferred. These charges are usually defined as a percentage of the
transaction value and differ across states. Besides stamp duty, typically 1%
of the value of the property is charged as registration fee (to register the
document). Stamp duty payable in case the purchaser is a woman is
generally lower by about 1%-2% in most states. In Delhi, when purchasers
are one or more women, its 4%, in case it’s only men or a corporate body,
it’s 6% and in case it’s a man and woman it’s 5%. A further 1% is payable
at registration charges.

For the seller of the property capital gains tax would be calculated on the
value of the property as fixed by the Stamp Valuation Authority especially
when such value is higher than the declared value of the property as
appearing in the sale deed. In the situation of individuals and Hindu
Undivided Families receiving properties from non-relatives, the circle value
rate of the property would be treated as the amount on which income-tax is
payable according to the Income-tax Act. In case a buyer get’s it for a lower
price, the difference would be chargeable to tax as “Other Income”.

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