- Date : 17/02/2021
- Read: 6 mins
There are various methods of acquiring ownership of immovable property in India. This article features five ways to achieve this.
Investing in property has always been a trend in India. The transference of immovable property ownership to designated heirs is possible through direct purchase or inheritance. The most popular method of doing so is by executing a Sale Deed, also referred to as a Transfer Deed. However, this may not always be beneficial in terms of saving on taxes or being cost-effective.
Ownership of property can be obtained using five possible methods:
1. Purchase of Property
If you already own immovable property and wish to make an outright sale, then a Sale Deed is the way to go.
- It is mandatory to execute the Sale or Transfer Deed post by registering it with the office of the Sub-Registrar.
- This ensures that the ownership is transferred to your buyer.
- Stamp duty and registration fee must be paid when the Deed is being registered. This fee is variable from state to state.
- Taxes on Capital Gains will be applicable if you are the seller of the property. This will have to be paid by you.
- The purchase and sale of any property above Rs. 30 lakh have to be reported to the Income Tax Department by the Registrar.
- PAN declaration must be made for sale or purchase of immovable property exceeding Rs. 10 lakh.
- If the property purchased has a value of Rs. 50 lakh or more, 1% TDS will be applicable.
- Tax implications related to purchases which are ‘Under Construction’ properties can be different.
Related: Selling your house? Avoid these mistakes
2. Making a Gift Deed
A Gift Deed is typically useful when an immovable property is going to be shared amongst siblings, parents, etc. It is a more cost-effective method of real estate transfer.
- As per Section 17 of the Registration Act, 1908, it is mandatory to register any Gift Deed for immovable property.
- Transfer through a Gift Deed is irreversible and binding. Once the transfer has been executed, there is no way to undo the transfer or even seek financial compensation.
- The Gift Deed also attracts a stamp duty, which is lower in comparison to a Sale Deed.
- No tax is levied if the beneficiary of the immovable property has received it as a gift from a relative. If it is received from a non-relative, then a stamp duty of up to Rs. 50,000 is tax exempt.
- According to the provision of taxation of gifts, income tax is not applicable if the immovable property has been received as a marriage Gift.
- Tax exemption is applicable if the beneficiary receives the property as a Gift under a Will or through inheritance.
- If the property has been transferred through a registered Gift Deed which mentions your PAN number, you can present the value of the gift received as ‘Exempted Income’ in your Income Tax Returns.
- Read the rules for ‘clubbing of income’ provisions.
Related: An expert's guide to buying real estate in 2019
3. Transferring Via Relinquishment of Ownership in A Property
If you own multiple properties individually or through co-ownership, you may look to transfer rights of a particular property to another co-owner. This can be done by executing a Release or Relinquishing Deed.
- When a Relinquishment Deed is executed, the immovable real estate can be transferred with or without a considering.
- This transfer is irreversible.
- Stamp duty is applicable once the deed has been registered. However, it is only applied to the portion of the property that has been released or relinquished as opposed to the total value of the property.
- The Capital Gains tax is levied on the relinquished property portion.
- There is a point of difference between relinquishing and releasing a property.
- Relinquishing Deed is generally used in the absence of a Will. When a person passes away, the property is inherited equally by the beneficiaries. If one or more of the beneficiaries wish to relinquish their inheritance, the rights can be transferred via the Relinquishing Deed.
- Release Deed comes into play when two or more individuals own property, and one of them wishes to release their share rights.
Related: Confused in Real Estate Investment ? Here are 6 myths you can stop worrying about
4.Through settlement or partition of properties
The term co-owners of a property is used when an order by the local revenue authority or a court has to be implemented.
- Settlement Deed is executed if the immovable property is owned by a third person, who wishes to settle it in favour of an individual who does not have any prior interest in the said property. The share is outlined as per the wishes of the settler.
- The Settlement Deed is a non-testamentary document that comes into operation instantly; even if the settler is alive.
- The Settlement deed is irrevocable.
- For a Settlement Deed, stamp duty and the registration fee are compulsory. The stamp duty is derived as a percentage of the market value of the property. There are concessions available if the Settlement Deed has been made in favour of a beneficiary within the family.
- Capital Gain tax will not be applicable until such time that the parties involved in the settlement do not make a subsequent resale of the property.
Related: 4 Situations Every Home Owner Fears
5. Will or Inheritance
After a Sale Deed, Will or Inheritance is the second most common method of property transfer.
- As per the Law of Succession, the properties are transferred if a person dies intestate.
- The Testator during his/her lifetime can revoke the Will.
- Beneficiaries of the property will only receive ownership of the immovable property post the death of Testator.
- The beneficiary claiming the Will Deed or inheritance does not need to Register the property in his or her name after the death of the Testator.
- The recipient with a copy of the Will Deed, Succession Certificate (Legal-heir Certificate) and death proof (death certificate) will need to apply to the local civil authorities to process the mutation of the property in his or her name.
- According to the respective personal law, producing a death certificate of the owner transfers ownership to immediate heirs. For example, the spouse or children.
- It is not mandatory to register a Will Deed.
- Registration fee of Rs, 200 is applicable. However, no stamp duty is levied in this case.
- There are no tax liabilities when the ownership of property is obtained through a Will. Re-sale of property, however, will attract regular capital gains tax by the beneficiary.
While there are multiple immovable property transfer methods, living through the decision-making process can be an emotional affair. Think about your wants and needs before transferring assets and seek legal opinion when the circumstances demand it. How much do you know about buying a home? Take this quiz to find out.
Investing in property has always been a trend in India. The transference of immovable property ownership to designated heirs is possible through direct purchase or inheritance. The most popular method of doing so is by executing a Sale Deed, also referred to as a Transfer Deed. However, this may not always be beneficial in terms of saving on taxes or being cost-effective.
Ownership of property can be obtained using five possible methods:
1. Purchase of Property
If you already own immovable property and wish to make an outright sale, then a Sale Deed is the way to go.
- It is mandatory to execute the Sale or Transfer Deed post by registering it with the office of the Sub-Registrar.
- This ensures that the ownership is transferred to your buyer.
- Stamp duty and registration fee must be paid when the Deed is being registered. This fee is variable from state to state.
- Taxes on Capital Gains will be applicable if you are the seller of the property. This will have to be paid by you.
- The purchase and sale of any property above Rs. 30 lakh have to be reported to the Income Tax Department by the Registrar.
- PAN declaration must be made for sale or purchase of immovable property exceeding Rs. 10 lakh.
- If the property purchased has a value of Rs. 50 lakh or more, 1% TDS will be applicable.
- Tax implications related to purchases which are ‘Under Construction’ properties can be different.
Related: Selling your house? Avoid these mistakes
2. Making a Gift Deed
A Gift Deed is typically useful when an immovable property is going to be shared amongst siblings, parents, etc. It is a more cost-effective method of real estate transfer.
- As per Section 17 of the Registration Act, 1908, it is mandatory to register any Gift Deed for immovable property.
- Transfer through a Gift Deed is irreversible and binding. Once the transfer has been executed, there is no way to undo the transfer or even seek financial compensation.
- The Gift Deed also attracts a stamp duty, which is lower in comparison to a Sale Deed.
- No tax is levied if the beneficiary of the immovable property has received it as a gift from a relative. If it is received from a non-relative, then a stamp duty of up to Rs. 50,000 is tax exempt.
- According to the provision of taxation of gifts, income tax is not applicable if the immovable property has been received as a marriage Gift.
- Tax exemption is applicable if the beneficiary receives the property as a Gift under a Will or through inheritance.
- If the property has been transferred through a registered Gift Deed which mentions your PAN number, you can present the value of the gift received as ‘Exempted Income’ in your Income Tax Returns.
- Read the rules for ‘clubbing of income’ provisions.
Related: An expert's guide to buying real estate in 2019
3. Transferring Via Relinquishment of Ownership in A Property
If you own multiple properties individually or through co-ownership, you may look to transfer rights of a particular property to another co-owner. This can be done by executing a Release or Relinquishing Deed.
- When a Relinquishment Deed is executed, the immovable real estate can be transferred with or without a considering.
- This transfer is irreversible.
- Stamp duty is applicable once the deed has been registered. However, it is only applied to the portion of the property that has been released or relinquished as opposed to the total value of the property.
- The Capital Gains tax is levied on the relinquished property portion.
- There is a point of difference between relinquishing and releasing a property.
- Relinquishing Deed is generally used in the absence of a Will. When a person passes away, the property is inherited equally by the beneficiaries. If one or more of the beneficiaries wish to relinquish their inheritance, the rights can be transferred via the Relinquishing Deed.
- Release Deed comes into play when two or more individuals own property, and one of them wishes to release their share rights.
Related: Confused in Real Estate Investment ? Here are 6 myths you can stop worrying about
4.Through settlement or partition of properties
The term co-owners of a property is used when an order by the local revenue authority or a court has to be implemented.
- Settlement Deed is executed if the immovable property is owned by a third person, who wishes to settle it in favour of an individual who does not have any prior interest in the said property. The share is outlined as per the wishes of the settler.
- The Settlement Deed is a non-testamentary document that comes into operation instantly; even if the settler is alive.
- The Settlement deed is irrevocable.
- For a Settlement Deed, stamp duty and the registration fee are compulsory. The stamp duty is derived as a percentage of the market value of the property. There are concessions available if the Settlement Deed has been made in favour of a beneficiary within the family.
- Capital Gain tax will not be applicable until such time that the parties involved in the settlement do not make a subsequent resale of the property.
Related: 4 Situations Every Home Owner Fears
5. Will or Inheritance
After a Sale Deed, Will or Inheritance is the second most common method of property transfer.
- As per the Law of Succession, the properties are transferred if a person dies intestate.
- The Testator during his/her lifetime can revoke the Will.
- Beneficiaries of the property will only receive ownership of the immovable property post the death of Testator.
- The beneficiary claiming the Will Deed or inheritance does not need to Register the property in his or her name after the death of the Testator.
- The recipient with a copy of the Will Deed, Succession Certificate (Legal-heir Certificate) and death proof (death certificate) will need to apply to the local civil authorities to process the mutation of the property in his or her name.
- According to the respective personal law, producing a death certificate of the owner transfers ownership to immediate heirs. For example, the spouse or children.
- It is not mandatory to register a Will Deed.
- Registration fee of Rs, 200 is applicable. However, no stamp duty is levied in this case.
- There are no tax liabilities when the ownership of property is obtained through a Will. Re-sale of property, however, will attract regular capital gains tax by the beneficiary.
While there are multiple immovable property transfer methods, living through the decision-making process can be an emotional affair. Think about your wants and needs before transferring assets and seek legal opinion when the circumstances demand it. How much do you know about buying a home? Take this quiz to find out.
