TRANSFER OF PROPERTY ACT, 1882

Shakuntla Sangam Assistant ProfessorAt Dr. RMLNLU Lucknow

BACKGROUND

In India, the personal laws governed the transfer of property assisted by orders of Courts under Civil Procedure Code. Transfer of movable goods was regulated to an extent by the Indian Contract Act, 1872 AND in case of transfer of immovable property, the Anglo-Indian courts often turned to principles of Justice, Equity and Good Conscience as it prevailed in England at that time. Prior to Transfer of Property Act, 1882.

THE ACT

A Bill, finally presented to the Legislative Council, became a law on the 17th of February 1882 and came into force from 1st July of the same year. (137 sections)

The Transfer of Property Act, 1882 mainly deals with transfer of immovable property by the act of parties by the operation of law in some cases(section 57) sale by court Denendronath v Ramcoomar Ghose(1881) ILR 7 Cal 693, 8 IA 65, p 75.

OBJECTIVES

It intended to define and amend the existing laws and not to introduce any new principle. It applies only to voluntary transfers. It provides a clear, systematic and uniform law for the transfer of immovable property.

PROPERTYSection 6 of the Act says ‘property of

any kind’ it implies every possible interest or right that can be possessed and is a subject of ownership.

Property may be tangible or intangible, property is essentially a bundle of rights or interest. When a property is transferred it actually the transfer of rights. All rights in a property denote the ownership or absolute interest.

CONTINE……..MOVABLE PROPERTY

It can be transferred from one place to another

Movable property is dealt with under the Sales of Goods Act, 1930

Registration is optional as per the Indian Registration Act, 1908

Eg. A decree for sale of immovable property. A royalty.

Standing timber, growing crops, and grass. Right to collect rent of immovable property.

IMMOVABLE PROPERTY

The definition of Immovable property given in the S.3 of Transfer of Property Act 1882, is not exhaustive, it is the negative definition which exclude the things and says immovable property does not include standing timber, growing crops or grass.

The definition in the General clauses Act also not exhaustive but it is some what positive definition which includes land, benefits to arise out of land , and things attached to the earth.

TRANSFER OF PROPERTY

Section-5 Means an ACT by which a LIVING PERSON CONVEYS

property, in present or in future, to one or more other living persons, or to himself, 1[or to himself] and one or more other living persons; and “to transfer property” is to perform such act.

Future property not allowed“Living person” includes a company or association

or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.]

MODE OF TRANSFER Sale (Immovable Property). Transfer of

Complete Rights. Consideration. Mortgage. ( it is of six kind- 1.

Possession,2. Enjoyment,3. Subject to Condition,4. Equitable,5. Symbolic, 6. Constructive.) Limited Rights Transfer.

Gift- ( No consideration) Actionable claim.- Unsecure debt. Lease (Time force, Rent) NOTE-Will or Inheritance is the exception

of this rule as property transfer automatically by operation of law.

WHAT IS TRANSFER? 

“Transfer" means a process or an act by which something is made over to another. It does not however, mean that the making over of the thing should always be absolute.

NOT A TRANSFER OF PROPERTY

Family settlement. Compromise Partition. Surrender. Relinquishment. Charge.Release- It is a transfer of property,

because when larger interest falls into smallest interest every small interest generate a title for some one or new person.

PROHIBITED CATEGORY

Section- 6Part governed by personal lawsMuslim Law-Wakf of propertyHindu Law-Religious offering and

copasner like female legacyCivil Law- Agricultural LandProhibited by any other law in force.Spes Successionis- Expectation of

succession ( of gaining something) eg. Will or inheritance

ORAL TRANSFER

Section-9 says where writing is not necessary the property may be transferred orally. i.e. without writing any deed.

It means there are two mode of transfer- Delivery of possession- which generally

happened in case of movable property. Transfer by registration.

PERSON COMPETENT TO TRANSFER

Any body can transfer who- Attained the age of majority. Soundness of mind. There should be no other legal bar.Nemo dept quat non habit- You can

transfer only those which you have.Note- Competent to inter into a contract.

TRANSFER FOR BENEFIT OF UNBORN PERSON

General rule of TPA is transfer vivos that is transfer of property between living person at the date of transfer, but section 13 of this act provide the conditions where a interests can be created for unborn person or a person who is not exist at the date of transfer subject to certain conditions which is also authenticated by Indian Trust Act S.5

CONDITIONAL TRANSFER

S-25:Provides conditionsPre condition eg. Gift of house with

condition to marry After condition eg. Gift of house

with condition not visit within 3 years to USA

Simultaneous/side by site condition eg. Gift of house with condition has to live in the house.

TRANSFERRED WOULD BE VOID

Impossible conditions Unlawful / forbidden by law Impossible performance. Opposed to public policy Fraudulent conditions

DOCTRINE OF ELECTION

Section-35 : Election means choosing between two inconsistent or alternative rights . Under any instrument if two rights are conferred on a person in such a manner that one right is lieu of the other, he is bound to elect only one of them.

This doctrine is based on equitable principle under which a person may not be allowed to approve that of an instrument which is beneficial to him and disapprove its that part which goes against him. ( Probate &Reprobate)

APPLICATION OF ELECTION

When a person professes to transfer a property not his own

In lieu of the property the transferor confers certain benefits to the owner of the property

Transfer of benefit and confer of benefit to be part of the same property.

Suspension of Election- The election may suspend till the time there are any legal disability.

THE DOCTRINE OF LES PENDENS

S- 52; Les= Litigation & Pendens= Pending There is a pendency of a suit or proceeding The suit or proceeding must be pending in a

court of competent jurisdiction A right to immovable property is directly and

specifically involved in the suit The suit or proceeding must not be collusive The property in dispute must be transferred or

otherwise dealt with by any party to suit The transfer must affect the rights of the other

party to litigationIt applies only on immovable properties

PART PERFORMANCE

S-53-A; It is an equitable doctrine, it based on the Maxim equity looks on that as done which ought to have been done.

This doctrine protect the transferee who has done his part or willing to perform his part, he can not be distitle on the basis of the legal formalities has not been done.

SALE OF IMMOVABLE PROPERTY

S-54-Sale is the transfer of ownership, in exchange of price paid, or promises to paid or part paid or part promise.

Essential of Valid Sale Two parties seller and purchaser Competent parties Subject matter i.e. property in existence. Money consideration, price of the

property The conveyance/ contract made in

accordace with existing law

MODE OF SALE

Registration of Sale Deed: Sale relating only with tangible immovable property, if the value of property above Rs 100, it must be registered, in case of value of tangible immovable property less then Rs 100 such transfer may be made either by registered instrument or transfer of property.

Delivery of property : Deliver of tangible immovable property takes place when buyers takes the possession of the property.

HIRE PURCHASE AGREEMENT IS NOT AMOUNT TO SALE

Because the ownership of the property is not transferred to the transferee on the basis of such agreements. Purchaser take the possession of the property and agreed to pay the price against the property in future installment.

The installments are not the price paid in future.

In the same time the purchaser has the option to refuse the sale

The seller has also right to terminate the sale.

There is no absolute transfer of ownership.

MORTGAGES

Section-58(a) Transferring Limited interest of property for taking Loans. It is a security against loan on the basis of any immovable property

Where a loan is secured against any immovable property is called Mortgage, and when it secured against any movable property its called pledge.

ESSENTIAL OF MORTGAGE

There must be transfer of Limited Interest

Interest transferred against any specific immovable property.

Purpose of transfer must be to secure payment of any debt, or performance of an engagement which may give rise to a pecuniary liability.

UNSUFRACTUARY MORTAGAGE

Sec-58 (d) where mortgagor delivers the possession to mortgagee to retain possession until payment and to receive rents/profits BUT there is no right to sell the property.

CHARGE Secton-100: Where immovable property

of one person is, by act of parties or by operation of law, made security for payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all provisions in respect of ‘simple mortgage’ will apply to such charge. but it will be a ‘charge’ for purpose of registration under Companies Act, as per section 124 of Companies Act].

EXCHANGE

Section-118: When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an ‘exchange’.

ACTIONABLE CLAIM

S- 130 ‘Actionable claim’ means a claim to any debt or to any beneficial in movable property not in possession (either actual or constructive) of the claimant.

The claim should be such be such as Civil Court would recognize as affording grounds for relief. Such debt or beneficial interest be existent, accruing, conditional or contingent. 

Eg. Claim to any debt etc such as Arrears of rent

PF and Money due in insurance.

NON ACATIONABLE CLAIM

Copy right Debentures Beneficial interest in immovable

property

GIFT DEED Gift is an instrument to transfer ownership without any exchange

of money To gift immovable property, just have to draft the document on a stamp paper, have it attested by two witnesses and register it.

Registering a gift deed with the sub-registrar of assurances is mandatory as per Section 17 of the Registration Act, 1908, failing which the transfer will be invalid. Besides, such a transfer is irrevocable. Once the property is gifted, it belongs to the beneficiary and you cannot reverse the transfer or even ask for monetary compensation.

Gift movable property like jewellery, registration is not compulsory. At the same time, a mere entry in an account book is not sufficient to establish a transfer. Apart from physically handing over the property, you need to back it with a gift deed. The process is slightly different if you are gifting company shares. You will have to fill out the share transfer form and submit it to the company or registrar, and the transfer agent of the firm. Once again, get a gift deed drawn and executed to complete the transfer, but the document need not be registered.

ADVANTAGES The biggest benefit is that there is no tax implication

if you are gifting property to certain relatives .However, you still have to pay stamp duty.

which can vary depending on the state in which the transfer takes place. this duty have to pay even in the case of movable property. Expect to shell out 2-8% in case of relatives, and 3-8% for non-relatives.

Type of property

Relatives Non-relatives

Immovable 1-8% for value of property

5-11% for value of property

Movable 2-8% for value of property

3-8% for value of property

LIMITATIONGift deed cannot be revokedIt can be challenged on the

grounds that the donor was not of sound mind or a minor

Note- No one can gift a property that's held jointly.

RELINQUISHMENT DEED This document is quite different

from a gift deed, though the legal implications are the same.

It can be use to transfer rights in a particular property to another co-owner. Such a transfer is also irrevocable even if it is without any exchange of money. It must be signed by both and registered there is no discount for relatives, nor are there any tax benefits.

ADVANTAGE

It allows seamless transfer of the share in a jointly-held property.

"This document is most commonly used when a person dies without leaving behind a will and all siblings end up inheriting the property,". Unlike a gift deed, the relinquishment deed for monetary consideration can be drawn.

LIMITATION

There are no tax benefits.The term 'transfer' includes relinquishment,

not gift. When there is relinquishing of property for

monetary consideration, it will result in capital gains for the transferor and if the consideration is less than the stamp duty value of the property, the difference between the stamp duty and the consideration will be taxed in the hands of the buyer," .

If relinquish is without any consideration, the stamp duty value of the property will be its sales price.

WHO ARE RELATIVES? Wife or husband

• Brother or sister• Wife or husband's brother or sister• Parents• Wife or husband's parents• Parents' brothers and sisters• wife or husband's parents' brothers and sisters• Legal heir, if any

 TAX IMPLICATIONS OF SALE OF ANY HOUSE PROPERTY,

COMMERCIAL OR RESIDENTIALFor the purpose of Real Estate the Long-

term Capital gain would be only if you hold the property for more than three years, then it is subjected to tax @20%. In case you sell the property in less than three years time then it would become short-term Capital Gain and the same is required to be taxed at the prevailing tax schedule of the rate applicable to the assessed depending on his other incomes.

THE INSTRUMENTS THAT ATTRACT THE PAYMENT OF STAMP DUTY

The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

WHO WONT BE TAXED

Spouse: Lineal ascendant or descendant( their spouses) of you and your spouses.

Spouse’s siblings and their respective spouses.

Brothers or sisters of either of your parents.

Note- In case of Hindu undivided family, any member belonging to the family.

WHAT IS CONSIDERED AS INCOME?

SalaryProperty rental incomeCapital gains such as profit from sale of

house, land, gold, etc.Income from business/profession: This

applies for entrepreneurs and small business people who don't get a regular salary income. Some examples are doctors, lawyers, etc

Income from other sources such as interest received on bank deposits, winnings from lotteries or game shows, etc.

NOW, TAX ON PROPERTY TRANSFER

Income Tax! Any transfer of an immovable property will now invite a tax deduction at source of one per cent on the value of the transfer if it is Rs. 50 lakh or more, according to the provisions of the Union Budget 2013, which has come into force with effect from June 1, 2013. The objectives of this provision are multiple many significant transactions go unreported with neither the buyer nor the seller quoting a PAN and also the one per cent TDS on these transactions will address fiscal deficit by increasing revenue collection. While the objectives are commendable, the lay person is likely to face several questions such as is TAN (Tax Deduction and Collection Account Number) required to comply with provisions, how does one issue TDS certificate to seller, filing of TDS returns, deposit of taxes and scrutiny from the TDS officer, etc.

SECTION -3(1) IN THE PAYMENT OF TAXES (TRANSFER OF PROPERTY) ACT, 1949

Where any document required to be registered under the provisions of clause (a), clause (b), clause (c) or clause (e) of sub- section (1) of section 17 of the Indian Registration Act, 1908, purports to transfer, assign, limit or extinguish any right, title or interest in any property, other than agricultural land, belonging to any person to whom this Act applies, no registering officer appointed under the said Act shall register any such document, unless it is certified by the Income- tax Officer of the area in which the property is situate in respect of the person whose right, title or interest in the property is to be so transferred, assigned, limited or extinguished 

SECTION 4 IN THE PAYMENT OF TAXES (TRANSFER OF PROPERTY) ACT, 1949Recovery of taxes where property has been

transferred without a certificate, of any right, title or interest in any immovable property, other than agricultural land, belonging to any person to whom this Act applies, the Income- tax Officer of the area where the property is situate is satisfied, after giving such person notice in this behalf for a period of not less than one month, that no certificate in the terms mentioned in section 3 would have been issued to him if this Act had been in force on the date the transfer was made, he may.

THANK YOU!