(1) By a Gift Deed

Under section 122 of the Transfer of Property Act, 1882, one can transfer
immovable property through a registered gift deed. The immoveable
property is transferred voluntarily without any consideration. Transfer
through a gift deed is also irreversible and binding. To make the transfer
valid it is mandatory to register a gift deed with the sub-registrar as per
section 17 of the Registration Act, 1908, and section 123 of the Transfer of
Property Act, 1882.

Generally, the transfer by way of gift is prevalent in cases where the

transfer happens within blood relations as there is an exemption as regards
stamp duty which varies from state to state. For instance, in Maharashtra,
in case the property in consideration is a residential or agricultural
property and is gifted (without any payment) to family members, then, the
stamp duty payable is Rs 200. A residential/agricultural property can be
gifted to blood relations without being liable to pay consideration unlike
sale/conveyance deed.

The Income tax Act, 1961 specifies that capital gains arising out of a
gifted property to blood relations are exempted from tax. However,
income accrued from the gifted asset may be taxable.

(ii) By a Partition Deed

Generally the transfer by way of partition takes place in cases where the
Karta of the Hindu Undivided Family (HUF) owns various/larger
properties (land or otherwise) and wants to transfer the same to other
family members Once the partition deed is executed, each member
becomes the independent owner of his/her share in the property and is free
to sell, lease, gift, etc. his/her asset.

The only issue that remains in this kind of transfer is that there will be only
one title deed in original and various other owners won’t be able to hold
the custody of the original. However, the same does not vitiate the
ownership right of the individuals over the property/ies.

To attain legal validity, a partition deed must be registered with the sub-
registrar of the area in which the immovable asset is located.
The parties involved in the partition will have to pay stamp duty charges
(under the provisions of the Indian Stamp Act, 1899) and registration
charges, to get the partition deed registered.

The beneficiaries are not liable to pay any capital gains tax after the
division of a property through a partition deed.

(iii) By a Sale Deed

Under section 54 of Transfer of Property Act, 1882, sale is a transfer of

ownership in exchange for a price paid or promised or part paid and part-
promised. The most common way of property transfer is through a sale
deed.

It is crucial for the Sale Deed to be registered in the sub registrar’s office.
A Sale Deed if not registered does not pass the ownership to the buyer
even if he has paid the full amount upfront to the seller. Stamp duty and
registration fee are to be paid compulsorily for such transfer and such kind
of transfer attracts capital gain tax.

(The Maharashtra government, in its budget for 2021-22, announced a

concession of 1% over the prevailing stamp duty rate on property
transactions, if the transfer of house property or registration of sale deed, is
done in the name of women. Consequently, women buyers will now pay
only 2 % of the property value as the stamp duty.)

(v) By a Relinquishment deed

Relinquishment deed is a legal document/instrument where a legal heir

gives up or releases his legal rights in an inherited property for another
legal heir such as his mother, son, daughter, brother, sister, etc. The
transfer by a relinquishment deed is irreversible.

The said deed must be registered as per section 17 of the Registration Act,
1908.

The stamp duty is applicable only on the portion that is relinquished and
not on the full property value.

Transferring the property via a Relinquishment Deed for a consideration

will inevitably result in capital gains for the transferor and hence, no tax
benefits would accrue to the transferor.
(vi) By a deed of trust

A trust is an arrangement by which the property of the author of the trust

or settlor is transferred to another, the trustee, for the benefit of a third
person, the beneficiary. In general terms, trusts fall into one of two
categories, private trusts and public trusts.

As per section 5 of the Indian Trusts Act, 1882, s trust having immovable
property and created through a non-testamentary instrument has to be
declared through a registered written instrument.

Stamp duty on instrument of transfer (i.e., the Trust Deed) attracts a stamp
duty of 2-3% of value of assets transferred under the Trust Deed.
However, the State Stamp Act will be the final authority to decide actual
levy of stamp duty.

When a property is settled under a Trust, it is practically a gift and

provisions of section 56(2)(x) of the Income tax Act, 1961 will be
applicable. Section 47(iii) exempts the transferor from capital gains tax
under an ‘irrecovable’ trust. Please note if the trust is revocable trust, then
exemption under Section 47(iii) is not available and such transfer would be
subject to capital gains tax.

(vii) By an Exchange deed

Section 118 of the Transfer of Property Act, 1882 defines exchange as a

transaction where two persons mutually transfer the ownership of one
thing for the ownership of another, neither thing or both things being
defined as money only. Property can also be transferred between the
parties by executing two separate sales.

The stamp duty for the Exchange Deed will be the same as in a sale of
immovable property. The stamp duty will be calculated on the basis of the
property which has a higher value.

If there is an exchange of a residential property, the exemption can be

availed under section 54 of the Income Tax Act, 1961. There will no tax
liability for the owner who is exchanging the smaller flat for a bigger one.
Similarly, if you acquire a smaller flat with the market value
approximately equal to the indexed long-term capital gains, computed as
on the larger flat, then there will be no tax liability. In under any
circumstances, if the exchange of a residential property, commercial
property or land is against another piece of land or commercial property,
there can be no tax exemption. To claim an exemption on long-term
capital gains occurring on such an exchange, one can invest in a residential
home under section 54F or in capital gain bonds under section 54EC of the
Income tax Act, 1961.

By a Will

In transfer by a Will, the vesting of the property will take effect, after the
death of the person executing the Will and as per law of succession, the
properties are transferred if a person dies intestate. However, the
beneficiaries will only receive ownership post the death of the testator.

The Hindu Succession Act prescribes the rules relating to intestate

succession applicable to Hindus, Sikhs, Buddhists, Jains. The Sharia Law
is applicable to Muslims and the Indian Succession Act applies to
Christians and other persons not covered by the Hindu Succession Act and
the Sharia Law.

It is not mandatory to register a Will. A registration fee of Rs 200 is

applicable, however, no stamp duty is levied in this case.

Moreover, any asset inherited, either under a Will or through the laws of
succession, is exempted from income tax laws. Re-sale of property will
attract regular capital gains by the beneficiary.

A probate adds a legal character to the Will. A probate is a legal process

which authenticates/validates the Will as there is high possibilities of Will
being challenged. The entire process of probate of Will takes at least six to
nine months to complete. However, if there is any objection to the public
regarding the Will, then the probate of Will process can even take up to 2
years to get completed. Thereby, making it a lengthy and time-consuming
process. It is important to note that the probate of Will is not compulsory
in all states.

Letter of Administration

Letters of Administration is a grant by the Court to a person other than a

named executor or executors such as a close relation of the person who
passed away. Typically, Letters of Administration will be issued by the
Court when someone dies without a Will

Conclusion

After analysing various modes of transfer and its pros and cons, it can be
concluded that the transfer by way of sale, though not cost effective and
subject to is the most effective, recognised and prevalent as this mode of
transfer gives an absolute, unconditional and unfettered right of ownership
over the property. However, if the transfer is to be done within blood
relations, then it is advisable to get the transfer done by way of Gift deed
or relinquishment deed if one of the joint owners is releasing/transferring
his/her undivided share in the property. Further, in case the owner of a
property wants to enjoy the property during his/her lifetime and wishes to
transfer it to his/her kin and kith on his demise, then the available option is
to execute a Will which will take effect post demise of the Testator (owner
of the asset who writes his/her Will).

(It must be noted that the registration fees and stamp duty will vary from
state to state)