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Choose between release and gift deeds for property transfer

It is mandatory to register gift, release or transfer deeds with the sub-registrar of assurances

My mother and her sister inherited their father’s property. My mother intends to buy her sister’s rights at market value. Does she have to show this as a sale or make a release deed for consideration or show it as a gift? Eventually, my mother will give her sister the market value for her share. We were told that a release deed will not be possible, and it will have to be a sale deed. Please advice.

—Vishal Gurbani

Since your mother and her sister inherited the property in question from their father, we are assuming that the property is at present held jointly in the names of your mother and her sister. You may take one of the following steps to have your aunt’s share transferred in your mother’s name:

1) Your aunt may execute a gift deed in favour of your mother, thereby gifting her share in the property. A gift deed allows one to gift his/her assets or transfer ownership without any exchange of money. The gift of immovable property must be according to section 122 of Transfer of Property Act, 1882. Hence, your aunt must transfer her share of the property voluntarily, without receiving any consideration from your mother, and your mother must accept it during the lifetime of her sister while she is still capable of giving.

The transfer must be effected by a registered and stamped instrument signed by or on behalf of your aunt and must be attested by at least two witnesses. Stamp duty as per the applicable state is payable on the gift deed.

Since your mother wants to pay consideration at market value for the concerned portion of the property, a gift of that portion of the property will not be possible.

2) Your aunt may execute a release deed or relinquishment deed in favour of your mother, thereby releasing her share in the property in favour of your mother.

A release deed is quite different from a gift deed, though the legal implications are the same. Unlike a gift deed, you can draw the release deed for monetary consideration. A release is always an interest or share of the concerned property. The person in whose favour the release is made usually has a pre-existing interest in the property. You can use this instrument to transfer your rights in a property to another joint owner(s)/co-owner(s). Such a transfer is irrevocable.

As with all documents related to the transfer of immovable property, a release deed needs to be signed by both parties, stamped and registered. Stamp duty will be applicable only on the portion of the property that is relinquished.

3) Your mother can purchase her sister’s share by executing a deed of transfer and on payment of consideration (the latter renders the sale valid). Stamp duty will be payable on the deed of transfer, and the deed has to be registered.

Considering the facts mentioned, executing a transfer deed may be a preferred.

Please note that it is mandatory to register a gift deed, release deed or transfer deed with the sub-registrar of assurances as per section 17 of the Registration Act, 1908, otherwise the transfer will be held invalid. Thus, on execution of any of the aforementioned documents, the same will be required to be registered with the office of the sub-registrar of assurances within whose sub-district the whole or some portion of the property is situated, within a period of four months from the date of execution of any of the aforementioned documents.

For advise on the tax implications, it is recommended that you consult a tax adviser or a chartered accountant.

Queries and views at mintmoney@livemint.com

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