Transferring Property Ownership in India — Essential Steps for NRIs

Introduction

Property transfer in India can be challenging for an NRI, but knowing the rudimentary details can help simplify the situation. Suppose one is selling an inherited property, gifting a property to a relative, or dealing with other property title transfer situations. In that case, there are essential steps that one should be acquainted with. This article briefly summarises the main components and steps an NRI should consider before deciding whether to be involved in property transfer, alteration, leasing, or ownership within India.

Know The Legalities

Before selling or transferring any property, NRIS should know the relevant legal principles in India.

The FEMA and the Income Tax Act are critical laws controlling how NRIs buy and sell properties in India and handle other transactions.

Transferring Property Ownership-Essential Steps

Document Verification:

To change the ownership details in the land registry, you need to verify important property documents.

• Original sale deed: It is proof of legal title and ownership.
• Property tax receipts: These papers show that ultimate dues concerning the property or land taxes have been cleared.
• Encumbrance certificate: This certificate shows if there are any legal liabilities or loans against the property.
• Approved building plan: It verifies that the property complies with local zoning and construction laws.
• NOC from the housing society: This is required if the property is part of a cooperative housing society.

Additional documents may include the title documents tracing ownership for at least 30 years, an Occupancy certificate, and a Mutation extract.

These documents must be carefully examined because the subsequent property title transfer will hinge on such examination. A legal professional should review all records and documents to ascertain correctness and sufficiency.

Power of Attorney (POA):

If you are unable to be physically present in India at the time of transfer, then delegate someone trustworthy as your Power of Attorney Holder:

While enforcing the power of attorney, one must remember the following:

• The POA has to be signed in the presence of a public notary in your country.
• This needs to be attested by the Indian Embassy or consulate in that particular country.
• It must define the powers which may be given to the holder of the POA (e.g. to let, sell, or cede right on property, etc).
• The agent’s power can be general or confined to property transfer.

For managing financial transactions and property ownership a POA is required. Please ensure that the document is appropriately executed in compliance with Indian law and registered for real estate transactions in India.

Property Valuation:

Please ensure you get an updated property valuation to accurately determine the fair market value, calculate taxes, and comply with exchange rate regulations in transactions involving multiple parties. Measurements from different sources should also be gathered for a more precise estimate and to avoid potential legal and Tax complications.

Tax liabilities:

Prior to the transfer of the property, it is imperative that all tax liabilities are settled like:

Capital Gains Tax (if sold):

• Short Term (less than 24 months): Tax rate fixed based on your income
• Long Term (hold for 24 months or more): 20% with increasing profit

Gift tax (if giving a gift to a relative):

• Give a gift to a relative. Gifts are tax-free for the recipient
• The recipient may be subject to gift tax when giving gifts to non-relatives.

TDS:

Under the Tax Deducted at Source (TDS) rules, the recipient is required to deduct 1% TDS on assets exceeding 50 Lakhs.

It is advisable to seek guidance from a tax expert to understand your specific projects and explore tax-saving opportunities. Understanding different tax systems, such as the Double Taxation Avoidance Agreement, Foreign Income Taxes, and reinvestment options to reduce capital gains tax is essential for NRIs.

Transfer Deed Execution:

A legal deed, to transfer a property title is essential.

• Sale deed: This document, to sell the property should outline the terms of sale and provide a detailed description of the property.
• Gift deed: This document is used to gift property and should specify the donor, recipient, and pertinent property details.
• Relinquishment deed: This deed is used when one transfers their share of property to co-owners.

A well drafted transfer deed would include the following:

• Accurate property description, including the location, dimensions, and boundaries.
• Complete details of all involved parties in the transfer.
• Clear terms for the transfer.
• If it is a sale deed, then the consideration amount should be included in the deed.
• The signatures of the witnesses and all parties involved in the transaction.

It is always beneficial to hire a lawyer to draft or review the deed to ensure that it contains all necessary terms and is legally sound.

Deed Registration

For a property transfer to be valid, you must register the transfer deed at the sub-registrar’s office. Registration and stamp duty should be duly paid. Usually, registration costs about 1 per cent of the property in question more often than not with some limit; on the other hand, stamp duty differs from one state to the other but rarely goes below 5 per cent and 7 per cent of the property’s price.

As an NRI, it’s important to prepare the following documents for submission:

Deed signed and stamped by the registrar

Distinct registration number provided upon completion

• Original transfer deed
• Property documents
• Power of Attorney (if applicable)
• PAN cards of both parties
• Passport copies (for NRIs)
• Photographs of all involved parties

Biometric verification will include fingerprint scans and photographing of the parties or their representatives.

Municipal Record Updates:

After the registration is over, it is vital to move on and go to the relevant authority to update the property record. Applying for the name change in the property records section of the Revenue Department is a detailed procedure. In the electric and water connection department, you can also transfer the electric and water connection to the other party whose name the property is transferred.

Fund Repatriation (If Applicable):

There are several guidelines provided by the Reserve Bank of India (RBI), and one should make sure to note those guidelines for the sale of the property if the end goal is to repatriate proceeds:

• Obtain a Form 15CB certificate from a chartered accountant attesting to the tax conformity and providing information about the nature of the transaction.
• Fill out the online Form 15CA, a declaration for sending money overseas.
• The cash can be routed through a Non-Resident Ordinary (NRO) account and depositing the transaction proceeds into it.
• You can apply for repatriation by sending the required paperwork to the bank. Banks typically allow repatriations of up to USD 1 million each fiscal year.
• In addition, if the amount exceeds USD 1 million, you must obtain RBI permission and, if necessary, provide documentation of your first foreign currency investment.

Comply with FEMA (Foreign Exchange Management Act) regulations to repatriate money from property transactions.

Special Considerations for NRIs

• Agricultural Land and Plantation Property: NRIs, as per law, cannot buy agricultural land or plantation property in India. If you inherit such property, you may need special permission to transfer or sell it.
• Gifts to Relatives: While NRIs can freely gift residential or commercial property to Indian relatives, there may be restrictions when gifting to other NRIs or foreign citizens. Consult legal experts to understand the implications.
• Taxation: When dealing with taxes in India and an NRI’s country of residence, be sure to consider Double Taxation Avoidance Agreements (DTAA) with India and consult your tax advisor for guidance on specific provisions.

Conclusion

To transfer property ownership in India, verify the property documents, register the transfer deed, and inform the revenue department. NRIs should follow these procedures for a trouble-free transfer. Consulting lawyers and accountants who know what they are doing with NRI property to wade through the red tape of Indian real estate laws and regulations is necessary.

This article gives a general outline of the necessary steps, but it should be recognized that every situation of property transfer may have different conditions. One must keep himself/herself updated with the new regulations and seek professional help to ensure that the transfer of land property goes smoothly in India.