Did you inherit a property or receive it as a gift?

Meera Siva October 1 | Updated on October 01, 2020

Here’s how you can get it transferred to your name without a sale deed

There is often a lot of ambiguity on when and how you become the owner of a property that you inherited or were gifted. Unlike ownership through a sale deed, the transfer of property rights when no money is paid can have many grey areas as the required legal formalities and tax implications can often be confusing.

Legal routes

You can get ownership of a property through many routes. For example, there may be a partition of a property in which you are a joint owner and you may be become the sole owner of your part. This is usually done through a Partition Deed.

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Alternatively, in case of a joint property, you may become an owner when the other owners relinquish or surrender their rights. Relinquishment can be free or for a consideration — money or other assets. If the co-owners are family members, the transfer can be done through a Relinquishment Deed. If they are unrelated, a Release Deed is used.

In cases where you were not a joint owner, a property may be gifted to you. Unlike gifting that can happen even while the owner is alive, ownership transfer without payment commonly happens after the owner’s demise. This can be to a legal heir — with or without a Will — or to anyone through a Will.

Process aspects

Whatever the mode of transfer, you must register the instrument of transfer — Gift Deed, Transfer Deed, Relinquishment Deed, Partition Deed — with the appropriate government authority. This often requires providing proof and documentation of your claim to the property. For example, if there is no Will, you must establish you are the legal heir. The registration process involves costs and may vary between States and on the deed type, property type and value. For example, stamp duty for relinquishment is applicable only on the portion relinquished and not the full property value.

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Once the authorities establish the new owners, their share, rights and liabilities, you can apply for a property transfer at the sub-registrar’s office. After this, the ownership documents with the government authorities — such as the municipal corporation — must be updated with your name. This is through a process called mutation of records and requires the payment of various taxes, transfer of utilities, execute rent agreements and loan mortgages.

Tax considerations

Your tax implications vary based on the type of transfer. For example, property received under a Will is tax-exempted, even to non-relatives, while gifts received from non-relatives are taxable beyond ₹50,000.

For inherited property, you are liable for taxes on the profits made when it is sold. In this case, you must note that the holding period is not the date of inheritance but the actual date of purchase of the property. For instance, say you sold a property that was inherited just one year ago, but was purchased by the original buyer five years ago. The holding period is taken as six years and you are only required to pay long-term capital gains tax.

Tax filing of the income from the property also needs consideration. If the transfer is due to the demise of the owner, you must include the income from the date of acquiring. The income until the point of death is included in the tax return of the deceased person for that financial year. For the intermediate period — until transfer happens — the executors of the will are responsible for filing the income-tax returns.

Special cases

Some situations, such as an outstanding home loan against the property, require more consideration. The transfer of a mortgaged property can only happen with the written consent of the lender. That may require the loan to be transferred to the new owner or paid off.

You also become a part of any dispute or litigation involving the property. And in case of property being rented out, you must honour the original lease agreement terms.

Often, in ancestral properties, there are no ownership records. For example, the property may still be in your great-grandfather’s name and title documents may not be traceable. It may be advisable to take help and guidance to gather evidence to establish ownership, before applying for transfer.

Another special situation is if the property is a joint holding and the first name holder is no more. You must note that the second named person does not automatically become the owner, as the law of succession must be followed.

If the property is a flat that is part of a cooperative society, the ownership is in the form of shares in the society. Ownership transfer must be done with the society, even if you were appointed as a ‘nominee’. This typically requires providing the Will and consent of other legal heirs.

The author is an independent financial consultant

Published on October 01, 2020

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