How to transfer a property from parent to child in India
involves understanding legal requirements, choosing the right method, and ensuring a smooth transition of ownership.
Transferring property from a parent to a Child may be a big, emotional procedure with a lot of financial and legal ramifications. Depending on the conditions and wishes of the parties involved, different methods of transferring property exist. A smooth transfer of ownership can be ensured by being aware of the potential dangers, tax ramifications, and legal requirements. In addition to providing comprehensive procedural steps and legal concerns, this page examines the different ways that property can be transferred from a parent to a child in India, including gift deeds, wills, sale deeds, and relinquishment deeds.
Methods of Property Transfer
1. Gift Deed:
- Definition: A gift deed is a type of legal document that enables a parent to willingly give property to their child in lieu of money.
- Procedure
- Creating the Gift Deed: Hire a lawyer to create the deed, making sure to include all pertinent information about the property, the donor’s (parent) and donee’s (kid) details, and the gifting intention.
- Execution: At least two witnesses confirm to the parent’s signature on the gift deed.
- Stamp Duty and Registration: Pay the relevant stamp duty, which varies by state but is typically less for familial transfers. For the deed to be enforceable, it needs to be filed with the local sub-registrar’s office..
- Advantages: This method is relatively straightforward and quick.
- Considerations: Once a gift deed is executed and registered, it is irrevocable except under circumstances of coercion or fraud.
2. Will
- Definition: A parent’s testamentary document that outlines the distribution of their assets upon death is called a will.
- Procedure:
- Drafting the Will: The beneficiary (kid) and the property should be specified in the will with clarity. The testator, who is the parent, must sign it, and two witnesses must testify to it.
- Probate: The will needs to be validated in court upon the parent’s passing in order for it to be deemed legitimate
- Advantages: The parent retains control over the property during their lifetime.
- Considerations: Wills can be contested by other heirs, potentially leading to legal disputes
3. Sales Deed
- Definition: A sale deed is a legal document that transfers property ownership from the parent to the child in exchange for monetary consideration, even if nominal.
- Procedure:
- Drafting the Sale Deed: Prepare a sale deed with a lawyer, detailing the sale amount, property description, and parties involved.
- Execution and Registration: Both parties must sign the deed in the presence of witnesses. The applicable stamp duty must be paid, and the deed must be registered with the sub-registrar.
- Advantages: This method provides a clear legal transfer and is less likely to be contested.
- Considerations: It can involve higher costs due to stamp duty based on the market value of the property.
4. Relinquishment Deed:
- Definition: A relinquishment deed is used when a parent wishes to give up their share in a jointly owned property to a child.
- Procedure:
- Drafting the Relinquishment Deed: The deed should state that the parent is relinquishing their share of the property in favor of the child.
- Execution and Registration: The deed must be signed in the presence of witnesses, the requisite stamp duty paid, and the deed registered with the sub-registrar.
- Advantages: Simplifies the transfer of jointly owned properties.
- Considerations: Applicable only to jointly owned properties.
Tax Repercussions
Under Section 56(2) of the Income Tax Act, transferring property within the family—especially through a gift deed—is typically free from income tax. Stamp duty and registration fees are still applicable, though. States have different fees, however transfers within immediate family members frequently result in lower costs. Speaking with a tax professional is essential if you want to know the precise tax ramifications and any potential liabilities.
Legal Aspects to Take into Account
Exercise Due Diligence: Verify that any property records are unambiguous and devoid of any liens. To prevent future issues, make sure the ownership and title are thoroughly verified.
Legal Support: Hire a lawyer to help you through the legal maze, prepare the required paperwork, and make sure everything is executed and registered correctly.
Witnesses as well as Registration: To verify the transfer and give it legal force, witnesses must be present, and it must be properly