Oral agreement among Class I heirs doesn’t need stamp duty

The Hindu Succession Act, 1956 governs intestate succession for Hindus

My father died intestate in 1979 leaving behind a property in South Delhi. I stay on its first floor, and my brother on the ground floor. We want to have legal documents that convey the rights of the respective floors to us, and the second floor (barsati) to our sister. Can we do this without paying 1% stamp duty as applicable on partition deeds in Delhi since there is no sale or monetary consideration here?

—K. Nandakumar

We are assuming that at the time of your father’s demise, he was a Hindu, governed by the provisions of Hindu laws and that he was survived by only three Class I heirs—you, your brother and your sister. We are also assuming that this house was your father’s absolute property, and that in the past, you along with any siblings have not entered into any arrangement for its partition.

The Hindu Succession Act, 1956 (Act) governs intestate succession for Hindus. Under this, children of the deceased are considered as Class I heirs and hence all the children shall have equal share in all the properties of the deceased. So, after your father’s death, the property has devolved on all the children equally as a joint property and each child holds an equal undivided share in it.

The law provides for partition of a joint property by way of a suit for partition (normally, when there is a dispute among the heirs) or by way of an instrument of partition.

An instrument of partition (as a deed or otherwise) creating or extinguishing the rights in immovable properties of each heir in the immovable property is required to be mandatorily registered under Section 17 of the Registration Act, 1908, and will also require appropriate stamping. As per the Indian Stamp Act, 1899, the correct stamp duty in Delhi is 2% of the value of the separated share or shares of the property (and not 1%).

Registration charges will also be payable on the instrument of partition. In the present situation, the largest share remaining after the property is partitioned, shall be deemed to be the share from which the other shares are separated. So, the stamp duty payable would be 2% of the market value of the separated two shares. A partition evidencing creation of rights in immovable properties in Delhi cannot be effected without paying the stamp duty.

However, Class I heirs may enter into an oral agreement or a Memorandum of Understanding or Memorandum of Family Arrangement or Memorandum of Family Settlement with a view to allocate different portions of the immovable property to different heirs, which would not require stamping at 2% of the value of the separated share or shares of the property and can be stamped as a normal agreement. With such an instrument, the heirs do not actually divide or agree to divide the immovable property.

A division bench of the Delhi High Court in Nitin Jain Vs. Anuj Jain and Ors. has held that: “However, an oral family settlement dividing or partitioning the property is not required to be stamped. Similarly, a memorandum recording an oral family settlement which has already taken place is not an instrument dividing or agreeing to divide property and is therefore not required to be stamped."

The effect of this document is that while the Class I heirs may take possession of such individual portions of the property, the actual ownership of the heirs on the respective shares in the property is not established in the property and all three of you will continue to have an equal undivided share in the property.

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