Transfer of property is a process of legally transferring the ownership of property from one person to another. Generally, both the movable and immovable assets are transferable, which includes independent houses, flats, villas, bungalows, plots, or land parcels. Under the transfer of property act 1882 , a person can transfer the legal ownership and interest of property to another person.
To learn more, stay here and read the following article. It explains what property transfer is, its types, and the associated process.
What is Transfer of Property?
The Transfer of Property Act, 1882 is an important Indian law that governs how ownership rights in property can be transferred from one living person to another, either in the present or the future. Here, a “living person” can be an individual, company, association, or group of individuals. The Act allows property to be voluntarily transferred through sale, gift, mortgage, lease, or exchange. If a transfer occurs through fraud, coercion, or without proper legal procedure, it may be deemed invalid and subject to legal challenge..
Modes of Property Transfers in India
Gift Deed Transfer: A gift deed transfer involves transferring the ownership of a property to another without any monetary consideration. It generally takes place between family members, well-wishers, friends, or charitable organizations. This process may include tax implications; however, an individual can consult the expert for proper guidance.
Partition Deed Transfer: This transfer is applicable for co-owners, who can separately transfer their respective shares to another person or company. Partition deed transfer helps efficiently in case of joint ownership among business partners or family members. To empower the new ownership, the process must be registered at the sub-registrar’s office.
Sale Deed Transfer: It is the most common type of property transfer and involves selling a property from one person to another in exchange for a predetermined monetary consideration. This registration will be valid when the sale deed is registered with the sub-registrar’s office. Sale deed transfer requires the mutual consent of both parties (buyer and seller) before establishing the ownership rights.
Who Can Transfer Property?
Here are the lists of legal conditions involved to transfer the ownership of a property legally:
- He or she should be at least 18 years old.
- They must hold a legal property ownership or have a legal authorization to transfer the ownership of a property.
- They must be mentally stable and have the capability to make informed decisions.
When the aforementioned conditions are applied, you can transfer the complete or partial ownership to another person or people.
Tax on Property Transfer in India
During the transfer of property ownership, both the buyer and seller are liable to pay certain taxes to the government based on the transferring type:
For the buyer of a property:
- Mutation fee – Rs. 100 to 1000 (Based on the property value)
- Stamp duty – 4% to 7% of the property’s market value
- Registration fee – 4% of the total property value
For the seller of a property:
If the seller earns a profit from transferring property ownership, such as selling it for more than the purchase price, they are liable to pay capital gains tax. The tax is calculated based on the amount of profit and must be paid to the Income Tax Department of India as per applicable short-term or long-term capital gains rules.
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Essential Steps in the Transfer of Property
From the preparation of legal documentation to final registration, you have various crucial steps to follow. Here are those:
Agreement to Transfer (Memorandum of Understanding): This is an initial step defining both the buyer and seller obeys the fundamental terms of the transactions. An agreement like the property sale agreement outlines the crucial data like payment schedule, possession date, property details, sale price or contingencies. It is essential to ready this draft under the concern of legal experts.
Due Diligence: Before transferring, the buyer needs to verify the legal standing of the property and the seller. With the help of a lawyer, you can conduct a title search to ensure the seller is free from claims, or disputes. Ensure inspecting the property physically and reviewing the title deeds, property tax receipts, original sale deeds, occupancy certificates, building approvals, and No objection certificates from related authorities.
Sale Deed Preparation and Execution: Sale deed is a primary document required to legally transfer the ownership of a property. It includes buyer and seller information, property details and the sale consideration. During execution, both the seller and buyer must sign the sale deed in front of witnesses.
Processing Fee: Property transfer process involves stamp duty and registration fee. It can vary by state and you need to ask the relevant authorities to know exactly.
Registration: If everything is ready, you can visit the sub-registrar’s office and submit the necessary documents including the identity proof, sale deed and payment receipts. It is important to present the witnesses during the registration.
Records Updation: It is the final administrative step involving registering the buyer’s name in the revenue records of the local municipal body. Mutation ensures that the property is successfully transferred to the new owner’s name that actively prevents future disputes.
Documents Required for Transfer of Property
To transfer the ownership of a property in India, there are key documents required. They include:
Sale deed—A primary document that includes the significant details like parties involved, sale price, and other relevant information.
Property Tax Receipts—It indicates that the property tax is paid up to date.
Encumbrance Certificate—This document ensures that the particular property is free from any legal liabilities.
Passport-sized Photographs— Property ownership typically requires the photograph of both the buyer and seller.
Identity and Address Proof—Both the buyer and seller need to submit valid ID proof, such as voter IDs, Aadhaar cards, or passports. The address proof includes bank statements or utility bills.
Previous Sale Deed—The owner needs to submit the original copy of the previous sale deed to verify the ownership history.
Legal Considerations in the Transfer of Property
The transfer of property includes various laws and regulations. Both the buyers and sellers need to be aware of such considerations before proceeding. Let’s have a look at them:
Get Knowledge about Tax Implications: During property transfer, you have to deal with various tax consequences such as estate taxes, transfer taxes, or capital gains taxes. To complete this process efficiently, consult a professional real estate attorney to walk through these issues.
Local Laws and Regulations: It is important to ensure that the property transfer processes align with local and state federal laws. Therefore, you need to be aware of environmental regulations, local zoning rules, building codes, and disclosure requirements. Seeking assistance from legal experts prevents you from falling into such traps.
Legal Guidance: Property transfer is a critical process. To avoid any legal consequences, individuals need legal assistance from real estate attorneys throughout the process. They conduct legal searches and go through all agreements to ensure that they are properly aligned with the regulations.
Must be Aware of Contractual Obligations: Both parties must meet their legal obligations while engaging in a property transfer. If you disregard any rules and regulations, it may lead to various consequences, including penalties or litigation.
Final Thoughts
The transfer of property is a legal process that includes various regulations and considerations to ensure a successful and trouble-free transfer. Both the buyer and seller should familiarize themselves with the determined laws to proceed every single step accordingly. It is essential to understand that every property transfer is unique, so you need to seek professional advice to enable a smooth process.
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