Procedure of Transfer of Immovable Property

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. 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.

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.

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.

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.

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 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”.

Comments (33)

  1. Samir Naik says on 28 Mar 2018

    Can I transfer property owned by me to a Pvt. Ltd. company in which I have 90% equity interest?

    • Praveen says on 14 Sep 2019

      You can transfer your individual property only after paying appropriate Stamp Duty according to Section 5 of Transfer of property Act

      • Sunil rodrigues says on 29 Jun 2020

        We are Title holders of Lands since 1930 some developers have constructed under Benami Bogues SRA how much stamp duty is to be paid on Lands transfer to Builder’s or Benami society

    • Ranjit says on 03 Apr 2020

      Can I transfer my property vide oral agreement accompanied with the delivery of possession.

  2. shan says on 21 Jun 2018

    We are two sisters (both NRI) who have inherited a flat in Delhi via a Will from our parents. Now one of the sister wants to relinquish her rights to the flat to the other.1. Relinquishment Deed or Memorandum of Family Settlement (MOFS)?2. Stamp Duty and Registration charges if female?3. Will it be on the amount we pay them or Circle Rate or anything else?4. How long does this process take?5. Do you undertake this and what are your charges?6. How will the amount of settlement be shown on the Deed?7. Income tax implicationsWill be helpful if I can get a response asap.

  3. sudhir r kulkarni says on 24 Jun 2018

    i had three partner having own property of midc plot

  4. Suvi says on 24 Jun 2018

    My grandfather had 4 children. 2 sons and 2 daughters . One married daughter and other unmarried. All the children are deceased. The unmarried daughter has written a will to give her portion of her sisters children. Now the sisters children claim 50% of the property.We want to equally divide into 3 parts, but the sisters children are very greedy and taking advantage of the will.The grandfather never made any will. The property is not even registered.Please help.

    • P K GUPTA says on 06 Jul 2019

      We are four brothers. On death of our father, one brother living in USA relinquished his share to his one brothe in India. This deed was mutated by SDM.Now can the brother in India execute another relinquish his share of property( 50%) in favour of another brother in India.

    • Chintaman says on 04 Jan 2020

      My father transferred two plot among me and my brother on 100 bond paper at Gram panchayat level. Ir was not registered at register office. For home construction I tried personal loan of PVT bank and had a mortgage. But due to high interest rates, I cancelled it at register office. In this process this property is registered at register office. I do not know this. Later I applied for SBI home loan, then SBI said property transferred at Gram panchayat is not legal, you will make a gift deed. So I made Gift Deed.Now property transferred registered two different way on my name. Then bank told me the title is not clear. It is correct? Please guide me

      • Singhania says on 22 Dec 2020

        Dear Mr. Chintaman,State Bank of India is right that the said property transferred at gram panchayat is not legal. However, since mortgage deed was registered at registrar office, it indicates that you have title to the mortgaged property. But as on date, the mortgage is also cancelled and therefore there is no document to establish your right to the property. Further, please note that only upon examination of the title documents of the said property and the letters issued by State Bank of India, we shall be able to give you a definite response on the aforementioned query.

  5. Charulata says on 24 Jun 2018

    My husband is paying installments of loan for a house which is in the name of his brother.the property belongs to his brother because his brother has taken loan on that property.now my husband wants half share of the property to be transferred on his name.so is there any procedure to do it before loan is finished.

  6. Jagat Halder says on 01 Jul 2018

    In the year 1982 I got a residential plot admeasuring 3.22 kottah for 999 years from W. B. Govt by paying salami @ Rs.5000/-per kottah. Govt. has now allowed me to transfer the said plot to actual occupier to whom I have allowed to construct house and stay by agreement as I was living in other state due to my Service requirement. Govt.has charged transfer fees @Rs.500000/- per kottah besides applicable stamp duty on market price and registration fees. I have transferred the said plot by registered deed and received Rs.10,00000/- lakhs as consideration money by cheque in two part, i.e. Rs.500000/- in March,2018 and rest Rs.500000/- in May,2018.Kindly advice how to put it in IT return for 2018-19 (AY) for capital gain. Although, there is no capital gain as the circle rate / market price is much higher on which stamp duty is paid by the transfaree

  7. Ammie Kaur says on 11 Sep 2018

    Hi My parents purchased a property on POA & now want to do a registered sale deed. The property is on my Dad’s name & now they want to transfer it to my mom’s name.. Is it possible… postal code 110045

    • Chethan k c says on 25 Jul 2020

      Sir…is it possible to divide a site by two and can have equal rights?equal right to sale?

  8. rakuten.co.jp says on 23 Oct 2018

    Excellent article! We are linking to this particularly great article on our site.Keep up the good writing.

  9. RENU BANSAL says on 07 Jun 2019

    In the year 2019, our 2 Private Ltd. companies have merged. There is a land in transferor company, whose title has not been transferred to transferee company till date. Now, we want to sell this land to 3rd party.I want to know can we sell the land to 3rd party with title of transferor company

  10. Suggested Webpage says on 28 Jun 2019

    Good article and right to the point. I don’t know if this is really the best place to ask but do you folks have any thoughts on where to employ some professional writers? Thanks in advance

  11. Manish Sharma says on 05 Jul 2019

    My grandfather had owned a property for around 5000 square feet and now he make his registery into two. I just want to know that how much money is require to get the registery transfer.

    • Singhania Partners says on 05 Jul 2019

      Dear Manish Sharma,(a) Whether registry of the property in two parts is permitted in that State should be the determining factor; and(b) Stamp duty is State specific subject and the same should be known before we can advise on the proper stamp duty payable.

  12. NIHAR JAIN says on 23 Aug 2019

    Why PANCARD is required from a guarantor for tranferring the property from one family member to another family member?

    • Singhania Partners says on 02 Sep 2019

      Dear Nihar Jain,Please elaborate on your query as we understand that this relates to a specific transaction.

  13. H. S. says on 19 Sep 2019

    My father is a widower and had built himself a single-storey house. The house is in his possession and he holds the sole title. Subsequently, as I was employed, he asked me to contribute money to build two floors for me and my elder brother to settle there with him. I accordingly made regular monetary contributions by way of cheques to help my father construct two additional floors. Presently I am living on the first floor whereas the second floor is vacant for my brother (presumably). My father continues to hold the sole and exclusive title to the entire property. I have now realised that his servants, on whom he is utterly dependent since my mother died a few years ago, have taken advantage of his advanced age and poisoned his mind against me and my family. As a result relations between me and my father are tenuous and strained, and he frequently asks me about vacating the first-floor, or he gets strangers to the house to depict a possible sale in future.1. What are my options to safeguard my interest – and claiming my portion of the house on the first and second floors?2. How can I ensure he doesn’t sell the entire property just to spite me?3. How can I ensure that he does not Will the Title of the house to his servants exclusively?

    • Singhania Partners says on 14 Oct 2019

      As stated in the query, the house is a self -acquired property of your father and therefore , at the very outset you have no right to use or take possession of any part of the house whatsoever. However, you are at liberty to claim a share of the property in lieu of your contribution in building it. But the onus is on you to prove your contribution by producing relevant evidence.It is a settled position of law that if you have the requisite evidence of your contribution in building the house, you may approach the Court seeking an injunction against your father from disposing the house and you may also file a suit therein claiming the share proportionate to your contribution towards building of the house.After the conclusion of the entire settlement process, your father is at liberty to deal with his share of the property in the manner he likes.

  14. Tripathy. says on 11 Oct 2019

    Hello Sir,Me and my brother co-own two flats. One in Delhi and the other one in pune. My brother wants me to settle in pune , hence I am relinquishing my share in Delhi flat and he is relinquishing his share in pune flat. Since I am moving to another city he is gifting me 50lacs as gift. Hope it would not attract any income tax on my end. We will sing a MoU and will mention above that he is gifting me 50 lacs and will get it registered by way of gift deed.Regards, Tripathy.

  15. Raja Naik says on 19 Nov 2019

    How to purchase an agricultural property attached to village (Revenue Village), the status of land as agricultural even its falling within the village boundaries (RTC entries still available).can we registered as revenue site, the land measuring 5guntas, please reply

  16. REKHA NEMANI says on 14 Jan 2020

    for share transfer from one company to the another, including the assets, do we consider circle rates of land, or market rates?

  17. Murali says on 19 Jan 2020

    We got a firm which is registered of 5 partners 2 partners bought their property as capital after one year two partners exit who brought property has exited from firm. Now how to register the property in the name of remaining partners

    • Singhania says on 27 Jan 2020

      Dear Murali,We believe that the response to your query is fact based and we will be able to give a conclusive answer only after reviewing the relevant documents.Accordingly, we request you to visit our office next week and we will be happy to take it forward from there.

    • Ranjit Kumar sinha says on 02 Apr 2020

      What is mean in all other case transfer of ownership can be done on oral agreement followed by delivery of possession.

  18. Parvinder singh says on 06 Feb 2020

    Our Himachal Pradesh based private limited company has now become public limited company. How to transfer the immovable property in the above scenario. What will be the value of transfer, stamp duty (if any).

  19. Sanjeev says on 24 May 2020

    My Father owned immovable Property was left behind with unregistered WILL in 1990. We were two brothers and two sisters and my mother who gave their Affidavit regarding no objections to Last WILL of my father and got Mutated the property in 2007. As per WILL after the death of mother who according to WILL had rights to enjoy 1/3 part of the property and WILL clearly mentions that after the death of my mother her 1/3 share shall be decided equally between we two brothers.My mother in influence of my divorcey sister transferred part of her 1/3 share in favour of divorcey sister through registered transfer deed.Presently after my mother had recently expired and we came to know about this illegal part transferred in favour of divorcey sister. Divorcey sister is in possession of one room with attached bathroom, store and dressing room. She had licencees right to stay, but now after the death of my mother she is blackmailing us for money to vacate the possession. Pls suggest best fast track to get possession from licencee sister. She too had given Affidavit of No Objection to fathers WILL in 2007

  20. Ramesh says on 20 Oct 2020

    My father purchased plot and I construct the house .My father expired in 2018 and after that we demanded our share then our one younger showed blood relation dead of 2015 I e. five years back of my father dead .My father attended even marriage after that period.Is such dead valid

  21. Rahul says on 25 Feb 2021

    My father gifted me house in mumbai and society is asking for transfer fees and i said there is no transfer fees in internal transfer they said will pass a resolution in meeting and will take it from you . Is this right procedure by society please guide urgently

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