Real Estate Property is one of the most sort-after investment options in India. You can acquire immovable property in many ways and there can be many situations when you wish to transfer your ownership in a property to your beloved ones.
The most widely used means of transferring or acquiring a property is through the execution of SALE DEED, which is also known as TRANSFER DEED. But, sale deed may not always be a tax-efficient (or) cost-effective mode.
There can be a situation when you would like to relinquish your share in the property to your daughter or sister. In such cases, transferring the property through a Gift Deed can be a suitable option.
Another situation can be, if you would like to ensure that your property is distributed to your beneficiaries according to your wishes, execution of WILL can be considered.
In this post, let us understand – What are the different ways of transferring real estate property like land, home, plot, flat etc.,? What are the tax implications under each mode? What are the major differences among different kinds of Deeds like Sale Deed, Relinquishment Deed, Gift Deed etc.,?
Different ways of acquiring or transferring Real Estate Property
You can acquire ownership of immovable property in the following 5 popular ways;
- By purchasing the Property
- Through GIFTS
- Through SETTLEMENT (Or) Partition of Properties
- Through relinquishment of ownership in a property (or)
- Through inheritance or WILL
1 – Sale Deed
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.
- Cost : Stamp duty and registration fee have to be paid to register the SALE DEED. The fees can vary from State to State. For example, in Karnataka you have to pay 5% of the market value of the property as Stamp Duty and 1% as Registration Fee.
- Tax Implications :
- If you are a seller of the property then you have to pay applicable taxes on Capital Gains. (Read : How to calculate Capital gains on sale of property? What is STCG / LTCG? How to save capital gain taxes on sale of immovable property?)
- Kindly note that The Registrar of properties will report purchase & sale of all immovable property exceeding Rs 30 Lakh to the Income Tax authorities.
- The monetary limit for quoting PAN for sale or purchase of immovable property has been raised to Rs.10 lakh from Rs.5 lakh.
- If you are buying a property worth Rs 50 Lakh or more then you have to pay 1% TDS.
- If you are a buyer and acquiring an Under-Construction property then the applicable tax benefits can be different. (Read : ‘Under-Construction Property & Income Tax implications’)
- Format : Below is the general format of Sale deed. Click on the below image to download Sale Deed Template (actual templates can vary from state to state, below one is applicable for property transactions in Karnataka).
2 – Gift Deed
A gift is money or 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’. It can be in the form of cash / movable property / immovable property.
If you would like to gift the property to any of your blood relative, 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.
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.
It can be a cost effective way of transferring the ownership in a property. (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.)
- Cost : The stamp duty is payable for registering a Gift Deed. The stamp duty on gift deed is generally less than the stamp duty that is applicable for selling the property through a Sale Deed. For example, in Karnataka the applicable stamp duty is Rs 1000 (fixed) and Rs 500 (fixed) as registration fee in case if the donee (receiver) is a specified Family member. In case of non-family member then it is 5% & 1% respectively.
- Tax Implications on acquiring a Property through Gift Deed :
- 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 non-relative then up to Rs 50,000 (stamp duty value of the immovable property or Fair market value of movable property) is tax-exempted.
- 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.
- If you get a property through a registered gift deed (wherein your PAN is quoted), you can show the value of the gift received as ‘Exempted Income‘ in ITR. This is to avoid any scrutiny by income tax authorities in the future.
- You need to watch out for ‘clubbing of income’ provisions. Kindly note that rules of clubbing of income comes into picture if you gift a property to your spouse, or minor children or Son’s wife. Any income earned by the recipient on the gift shall be clubbed with the income of donor (you).
- Read : ‘Gifts & Income Tax implications…‘)
- .Format : Below is the general format of Gift deed. Click on the below image to download Gift Deed Template.
3 – Relinquishment Deed / Release Deed
If there are multiple owner for a property, and if one of the co-owner wants 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.
- Cost : 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.
- Tax Implications: The tax on capital gains (like in Sale Deed case) is applicable but only on the portion of the property that you relinquish.
- Format : Below is the general format of Relinquishment deed. Click on the below image to download Relinquishment Deed Template.
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 father of two kids who owns a real estate property dies without leaving a WILL then his two kids inherit the property. If one of the siblings wants to relinquish his share in the property then he can execute Relinquishment deed in favor of his brother.
Whereas in the case of Release Deed, let’s say if both partners mutually purchased the property and one of the partner wants to release his share from the property than in that case Release Deed can be executed.
4 – Partition Deed / Settlement Deed
Partition Deed is generally executed by the co-owners of the property (jointly held property) when a court order or order by an local revenue authority has to be implemented.
In case of Settlement Deed, however, the property is owned by a third person and is settled in favour of person’s who do not have any previous interest in the said property and the share of the beneficiary is as per the wishes of the settler.
Unlike WILL, Settlement is a non-testamentary document which becomes operative immediately. Will is a testamentary document, which becomes operative after the death of its author. Also, WILL is revocable and can be modified by the testator, whereas Settlement deed is irrevocable.
- Cost : 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. However, concessions are available in case of settlement made in favour of family members. For example : in Karnataka the applicable stamp duty is Rs 1000 (fixed) and Rs 500 (fixed) as registration fee in case if the donee (receiver) is a specified Family member. In case of non-family member then it is 5% & 1% respectively. Partition Deed also has to be registered.
- Tax Implications: 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.” The transfer or re-sale can happen by executing Gift Deeds or Sale Deeds.
- Format : Below is the general format of Partition deed. Click on the below image to download Partition Deed Template.
5 – Inheritance / WILL Deed
You can acquire a property through inheritance or WILL DEED. If a person dies intestate then the properties are transferred as per the Law of Succession. WILL Deed can be revocable by the Testator during his/her life time. So, the beneficiaries of WILL get the ownership rights in a property only after the death of the Testator.
After the death of the testator, person claiming through the WILL DEED or inheritance need not Register the property in his name.
(Read : ‘Importance of writing a WILL..‘)
However he/she has to 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 mutation of the property done in his/her name.
After the death of 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 production of death certificate of the owner with details of property held by him.
(Read : ‘What is mutation? How to get Khata transfer done?’)
For example : If property is an agricultural land – Mandal Revenue Officer ( under Andhra Pradesh Land Revenue Act), and if property is house or vacant land in a city/village other than agricultural land — Offices of Corporation, Municipality, Panchayat can be contacted.
- Cost : Registration of WILL DEED is not compulsory. Stamp duty charges are not applicable and registration fee of Rs 200 is applicable (in Karnataka).
- Tax implications if property is acquired through inheritance or WILL : 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. The property which is acquired do not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the Property. Also, the year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition.
- Format : Below is the general format of WILL Deed. Click on the below image to download WILL Deed Template.
Transferring or acquiring a property is a BIG decision and can be an emotional one too. We suggest you to discuss the above property related matters with your family members / well-wishers and also take a legal opinion, if required.
Hope you find this post informative and useful. Kindly share your views and comments. Cheers!
Continue reading : Checklist of Important Property Documents in India | Legal Checklist for Property Purchase
(Post Published on : 30-August-2016) (Image courtesy of fantasista at FreeDigitalPhotos.net)
Dear Sir,
I am buying a flat in Shriram Proprtie WYT project 888 sqt. Area for 54 lakhs. It is project phase development and possession in 2025 aug.
1. can you please advice Is it is good to go with this property?
2. I am getting property in my name. Also, can you please confirm if my kid can sell the flat in fat future, Incase if they like to or rent it out to someone?
Regards
Chandrasekhar
Dear Sir,
I am a buyer.
I did registered agreement of sale in Jan 2006. I paid full amount in March 2006. Immediately seller signed on possession deed mentioning he received full and final amount. He even signed name change form of state electricity board and of property tax.
Since April 2006 i am paying electricity bills as well as annual property tax. I am staying in the flat since April 2006.
Now I want to sell the same flat but since sale deed is not in place, i am not allowed to sell. I contacted seller now to complete the pending formality. He is not ready to sign unless i pay him few lakhs in cash as black.
Is there a way I can clear the title with the agreement and possession deed papers?
Please please help/guide.
Regards,
Sanjay
Hi Sreekanth,
My mother gives (75 dismil plot) a plot to all of us 3 sisters and divided equally
to all sisters with 1000 rs stamp paper along with witness of 5 peaples (panchnama) in patna. Land front size is 90 feet and back size is 380 feet and she gives 30-30 feets front to each sister and rest land gives back side to all. Now all sisters makes their own name mautation (rasid) from block.
Now one sister has been sale the front of all the land of all parties through registered sale deed in patna. Please give the solution, how 1 will return my front land?
Dear Shanti,
Was it done through a Registered Gift Deed(s)? (or) a Written WILL?
Has your sister done with the Sale of property? Has it been registered?
Sir,
1. I own a BDA immovable site at Bangalore registered in my name having specific Khatha No. allotted to me by BDA. I am the sole owner of the said property.
2. Presently, I want to make my wife as co-owner of the said immovable property site by gifting her 50% share in the said undivided immovable BDA site property.
3. Please guide me the procedures to be followed in gifting the said property to my wife and adding her name as joint owner of the said property in the BDA records. Pleae provide me the format of the Gift Deed to be made in this regard and also the procdures followed in making the said property jointly in the names of myslef and and wife in BDA records.
Dear Ravindra,
You may kindly visit the concerned Sub-Registrar office, make a Gift Deed Draft with all the property details, get it registered at SRO.
Dear Sir We Purchased two Properties commonly between brothers in 1985 and 1979 and constructed in 2005 recently, wants to tranfer the legal rights of property amongst us
Dear anand,
You may kindly take help of a civil lawyer and can get this done!
Dear Sir, I am selling my property that is solely in my name and incurring a capital loss based on CII. Can I use the money in the way I want to? I would like to give my direct sister a sum of 20 lakhs through wire transfer or cheque. She is not an IT assessee. Will she be taxed upon receipt of the amount or not? Is there anything she needs to do?
Hi,
If you gift certain amount to your sister then no tax implications for both of you. But, advisable to show this as an ‘exempted income’ by your Sister while filing her ITR.
Related article : Gifts & Tax implications
Hi Sreekanth,
My Father had purchased a flat in Navi Mumbai , the purchase deed had his & my mother’s name jointly in it. He being the Primary holder & my mom as secondary holder. Before passing away, my father had submitted “Form of Nomination Application” Form No. 14 & submitted to the Secretary of the Society. He forgot to collect the signed copy from the Secretary of the Society.
My father had nominated his daughter’s as the nominee . The property tax is still appearing on my father’s name . I being one of his daughters is not technically and legally qualified, to read, understand and interpret byelaws, can you please help revert on this?
1. What all documents I need to submit to the Society on his death?
2. Since the flat is on my Father’s name & property tax has also got my Father’s name on it – do I need to change / transfer it on my mother’s name as the purchase deed had her name as joint owner.
3. What all documents I need to submit to the society just in case if my mom wishes to sell this house.
Dear VK,
1 & 3 – May I know if you are referring to your Apartment Residents’ Welfare society?
2 – You can visit the concerned civic body office (Corporation – Revenue Dept) and can get the mutation done on your mother’s name.
Related articles :
* What is Mutation of Property? How to apply for Mutation of Property?
* Property Sale Agreement Vs Sale Deed Vs Property Mutation | Differences & Importance
Hi Sreekanth,
My parents have a flat in their joint name. Last year my father passed. As per law, my father’s portion of the flat goes to his legal heir ie my Mom, myself (only child), and my grandmother (dad’s mother). We got a settlement deed registered with the registrar that my grandmother passed her share to me through love and affection. The settlement deed is done and registered. Any other steps to be taken? The flat builders are saying they need some transfer deed, no one told us about this? Please advice.
Dear Rohit,
Are they referring to Transfer of property title through mutation??
Kindly read :
* What is Mutation of Property? How to apply for Mutation of Property?
* Property Sale Agreement Vs Sale Deed Vs Property Mutation | Differences & Importance
I think that may what they are referring to. Even our advocate didn’t inform us about this. I will check with the sub registrar. Thank you immensely.
Dear Rohit,
Mutation is not done at Sub-Registrar office.
Kindly go through the above links..
Hello Sir, me & my parents are staying in a flat at Nashik, Maharashtra. The flat belonged to my maternal grandfather who passed away in 2009. We do have his death certificate as well as verbal consent to acquire the property. Moreover, my mother’s siblings (3 brothers, 3 sisters) have also expressed their intention to transfer the ownership title in favor of my mother. However, I urge you to kindly guide me through the whole process of easier & affordable legal transfer of ownership title of the property. Thanks in advance.
Thank you
Hi Sreekanth,
My Mother in law gifted a site to my wife. Please tell me the procedure how to add my name in the Khatha document
thank you
Dear narayanamurthy,
Are you a joint owner of the property?
No , the property (site) is gifted to my wife
Dear Narayanamurthy,
In such a case, your name cant be added to Khata..
Hello Sreekath,
I am looking to purchase an agricultural land . The survey number of the land shows 2acre 3 guntas. Owner wants to sell only 2 acres and wants to keep 3 guntas for himself. In this case how will the ownership in revenue records looks after completing transaction. Is it possible to sell part of the land of one single survey number? After completing transaction does both of us 2 cres and 3 guntas still shows same survey number.
Thank you
Dear Veerabhadra,
You can visit the concerned Panchayat revenue office and check if bifurcation of the said land is possible or not??
Hi Reddy,
Really helpful topic.
I have a query. Me and by partner jointly purchased a non agricultural land 50% share holder each. Now partner wants to sell his share, if we go for partition what will be the charges stamp duty & registration for non family members in case of partition deed in Karnataka?
I heard it’s same as family members charges 1000 per partition. Let me know.
Thanks,
Dear Punith,
Kindly contact a local real estate agent or civil lawyer or check at SRO portal..
Hello Mr Reddy,
My father owned a house and he is no more. Can my mother alone sell house to someone else without myself and my brother needing to be there? As we live abroad and cannot go to India just to sell house. My mother also lives abroad but has gone to India to visit family and thinking to sell house if she alone can do it without the presence of me and my brother. Kindly advise please.
Dear Pratik,
Has he left any written WILL?
Was it self-acquired by your father or an Ancestral property?
Hi Mr Reddy,
No there is no will.
It was self-acquired by my father.
Dear Pratik,
Both of you can give Power of Attorney to your mother and she can sell the property, provided the prospective buyer(s) agrees to this arrangement.
You may get this done through a civil lawyer.
Mr Reddy,
This is really helpful. Many many thanks for your responses.
Kind regards
Pratik
Sir,
Myself,my elder brother and sister are in the process of sharing my father’s self acquired property in Bangalore.My father is around eighty two years of age and my mother no more.
As for property distribution,My father told all the three of us,that he is fine with what we all
three comfortable with.
The market value of my father’s property is around
1.5crore.
I have a self-acquired property in pune.My sister who stays in Mumbai is interested in my pune property.She is ready to relinquish her rights on
my father’s proerty in lieu of my pune property.
My brother will relinquish his rights on father’s property if I pay him fifty lakhs.
Once I settle the above two(apartment and cash respectively), to my siblings I will
be the sole owner of my father’s property.All three of us are comforatble
with this arrangement.
Now the question is,1)how best to partition and register without attracting
any(minimum)tax.
2)Later there should’nt be any scope for litiation amongst us siblings
3)Can a partition deed include cash also?
Regards
suresh
Dear suresh ji,
1 – You may Gift your property to your Sister, which is a tax-exempt transaction and even the registration charges would be very minimal for executing a Gift Deed.
You can get Settlement Deed done by your Father with three of you.
(Unless your father Gifts the property to all three of you, sister/brother can not execute Relinquishment deed, as they are not the owners of the property currently)
Then, your father my Gift the entire share in the property to you. As it is a self-acquired property then there may not be any issue in the future as well.
You may kindly consult a civil lawyer as well.
Related articles :
* Got a Gift? Find out, if it is Taxable or Tax-free?
* Sale of Inherited (or) Gifted Property & Tax implications on Capital Gains
Dear sir…My Co- brother(my wife and his wife are own sisters) wants to give 50% of his land(150sq yds) to me with out any consideration out of love and affection towards me . Can he do that? If so.. Is it by gift or by settlement? Would our relation come under “family” as per IT Act? What would be stamp duty payable on it in Andhra Pradesh?
Dear JAGANNADHAM,
Spouse’s Sister’s husband falls under the definition of ‘Family’ under the IT act fro Gift related transactions.
He may execute a Gift Deed in your favor and this will be treated as a tax-exempt transaction and you can declare it in your ITR under Exemption income while filing your ITR.
Related article :
* Got a Gift? Find out, if it is Taxable or Tax-free?
* Can a Mortgaged property be Gifted, Willed or Inherited?
Hi sir,
If I buy and register a inherited property from my own brother for half the price of guideline value.
What are the tax Implication for my brother. How is the capital gains calculated. Is it as per the guideline registered. Or the amount which he got from me.
Say if the property total guideline value is 60 lakhs. The actual amount I’m giving is 30 lakhs. How it will be done.
Thanks
David
Dear David,
1) You may buy and sell a property at any mutually agreed price but the fact is that when you go to register the said property in the office of the sub-registrar, you would find that the official, supposed to register your property deal, would compare the sale consideration as mentioned in the sale deed with the fair market value of the property. The rate so fixed is known as the “circle rate”. Now if the sale consideration as mentioned in the sale deed is lower than the circle rate, the stamp duty would be calculated as per the value prescribed for circle rate
in sale deed you can mention consideration paid as Rs 30 Lakh but when document is submitted for registration stamp duty would have to be paid at the circle rate of Rs 60 lakh
2) For the purpose of calculation of capital gains circle rate (Rs 60 lakh) would be taken into consideration and not the price mentioned in sale deed.
Dear Sir, I own a flat in Chennai & I want to gift (or through settlement deed) it to my Brother-in-law (my wife’s brother) out of love & affection without any monetary consideration.
What is the Stamp Duty & Registration Charges?
Dear Rajendran,
Spouse’s brother falls under the definition of ‘relatives’ for Gift – income tax purposes.
Hence, the stamp & registration charges would be nominal. You may kindly visit your State’s Registration Dept portal and check.
Related article : Got a Gift? Find out, if it is Taxable or Tax-free?