Personal Finance

Ways to transfer property

Meera Siva | Updated on September 23, 2018 Published on September 23, 2018

Options can vary from a simple sale or a gift deed to a relinquishment deed

The owner of a property can give up his/her rights to another person through different methods, based on the situation. The most common way is through a sale deed where a payment is made for ownership transfer. There are other ways to get ownership conveyance, when there is no consideration paid. One example is property transferred through a will. You can also gift a property through a gift deed. Other legal ways to establish and transfer ownership include a partition deed and a relinquishment deed.

How does one gift a property?

Gifting a property must be done voluntarily, without any material consideration, as per Section 122 of the Transfer of Property Act, 1882. Typically, it must be absolute and unconditional, but there may be a purpose that can be attached to the use. For example, one can state that the gifted property must be used for educational, charitable or religious purposes. A gift is irrevocable and the transfer of ownership right happens immediately.

For a transfer to take effect, you must execute a gift deed, which must be registered. The document must be signed by the donor and attested by at least two witnesses.

What are the costs in registering a gift deed?

The registration costs vary with State and are also based on the relation between the donor and the gift receiver. In case of a gift to a family member — spouse, children, other blood relatives — the rates are lower. For example, in Maharashtra, gifts in some categories — between spouses, parents to children or to deceased son’s wife, and grand-parents to grand-children — are only charged ₹200. For other blood relations, gift deed registration is charged at 3 per cent. There is also no tax implication when there is transfer of property through a gift from a family member. In case of non-family members, stamp duty and registration fee tend to be higher. For instance, Tamil Nadu charges stamp duty of just 1 per cent (capped at ₹10,000) and registration charges at 1 per cent (capped at ₹2,000) of the value for family members, versus 8 and 1 per cent for stamp duty and registration charges, respectively, for non-family members. Gifts from non-family members are taxable.

What are the limitations of gifting?

A gift deed can be challenged in court as being created by coercion or on the basis that the donor was not of sound mind. Also, you cannot gift a property that is jointly-held.

What is the difference between transferring through a will and gifting?

Both a will and a gift enable ownership transfer without any payment. A will is a testamentary document — it becomes operative after the death of its author. Also, a will is revocable and can be modified any time by the author. However, a gift takes effect immediately and is irrevocable. A will need not be registered, though it is advisable to do so. It is however mandatory to register a gift deed as per Section 17 of the Registration Act, 1908.

There are differences in taxation aspects also. A property received under a will is tax-exempt, even to non-relatives. Gifts received from non-relatives are taxable beyond ₹50,000.

Under what conditions can you use the relinquishment deed?

Relinquishment is the surrender of one’s ownership rights and claims in a property in favour of a co-owner. This is done when one of the joint owners wishes to transfer their right — for free or for a consideration such as money or other assets. A release deed is similar, but there are subtle differences. A release can also be between unrelated parties who are co-owners, whereas a relinquishment is typically between family members and there is inheritance. Transfer through relinquishment is irrevocable, and the deed must be signed by both parties, stamped and registered. The stamp duty is applicable only on the portion that is relinquished and not on the full property value.

What are the differences between relinquishing and gifting?

Relinquishing can be viewed as a special case of gifting. The person to whom you relinquish your rights must be a co-owner of the property. No such restrictions exist in case of gifting and you can transfer your rights to anyone. The property that you relinquish is always an inherited property, whereas you can gift self-acquired property also. Typically, the charges for registration are lower for relinquishment compared with gifting.

How is a partition deed different from the relinquishing deed?

A partition Deed, like relinquishment, can be created by co-owners in case of jointly owned property. It needs to be registered to be effective. However, a partition deed is executed to divide the property so that each person’s share is clearly defined, and they become the owner of the share allotted. They can later relinquish their ownership in the joint property, for free or any consideration, through a relinquishment deed.

The writer is co-founder, RaNa Investment Advisors

Published on September 23, 2018
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