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Transfer Of The Ownership Of Property Rights In Case Of NRI (Overseas Citizens)

Alienation refers to the transfer of the ownership of property rights, for instance, sales, gifts as well as mortgages. The first step for any individual who has acquired a property in India by way of gift, purchase, inheritance, and relinquishment, etc., then the individual must make sure that all mutations and revenue records are executed in the favour of the individual as early as possible.

Typically, NRIs (overseas citizens) have no reliable representatives to execute transfer of property in India. Circumstances related to constraint in time, inability to travel, lack of knowledge and relevant information and increasing property prices in India entices obstacles like illegal possession of property, illegal transfer of property or even illegal sale of land by 3rd parties.

Therefore, to shield such prevalent property frauds against NRIs, the potential buyer must diligently transfer the NRI property as soon as possible in his name after properly following the due process of law as provided under Indian law. The entire procedure of transferring property title in India is quite cumbersome especially when the property paperwork is not in order as it can result in a lot of court disputes. For instance, a property transfer without a Will can automatically make the title of a property disputable.

Who is a Non Resident Indian (NRI?

  • A Non Resident Indian is an Indian Citizen as under the law who has not inhabited in India for more than 182 days during the previous financial year, or
  • who has left India or who inhabit outside India in another country with the intention to get employed in that country, or
  • who has left India or who inhabits outside India in another country to carry his/ her business or employment in that country, or
  • who has left India or who inhabits outside India in another country with an intention suggesting his/ her objective to stay outside India in another country for an undetermined period of time.

How can a person legally inherit property in India?

Different modes of property transfer in India

Transfer of property ownership can be transferred in 2 different ways:
  1. Voluntary Transfer
  2. Involuntary Transfer

A voluntary transfer is when the rightful owner of a property willingly transfers his/ her property which can be done in the following ways:
  • By gift
  • For consideration, for example, by sale, mortgage, lease or exchange, and
  • By will

An involuntary transfer or an involuntary alienation occurs when the court seizes the property of an individual. This mode of transfer may also transfer the assets of the joint family or undivided interest of a co- partner in such property.

Different kinds of properties that can be inherited by NRIs in India

An NRI just like any other Indian citizen can inherit any type of immovable property in India, whether the property is residential or if it's commercial. In fact, NRIs have a legit right to inherit agricultural lands as well as farmhouses, which otherwise is prohibited by way of purchase under Indian transfer of property laws. Additionally, an NRI can inherit any property from family as well as relatives. Besides this, an NRI can also inherit property from another NRI, but subject to certain regulations. For instance, RBI approval is mandatory in case the inheritance results in favour of a foreign citizen, who is a non resident Indian (NRI).

It is essential to remember that the individual, from whom the NRI inherits the property, must have obtained the property being bequeathed, in accordance with the provisions of the prevalent law relating to foreign exchange, established at the time of the purpose. Therefore, if the property in question was obtained without acquiring permission from the Reserve Bank of India, when the approval was needed to be acquired, then such property cannot be inherited by the NRI, without prior permission (to be specified) of the RBI.

Essential documents mandatory to transfer title of inherited property in India

The following are the crucial documents that are obligatory to execute transfer of property title in an inherited property in India:
  • A registered Will:
    Under the Indian law, it is not obligatory to get a Will registered, it can merely be written on a plain piece of paper duly signed by the testator. Registration of a document makes it an authentic document in the eyes of the law that may or may not have to be furnished to prove its authenticity in a court of law. Therefore, it is critically advised to get every Will registered. Besides, the person (testator) has the complete right to keep amending/ modifying his/ her registered Will.
     
  • A succession certificate:
    In case there is no Will then during its absence, the legal heirs will be required to obtain a Succession certificate from the court.

The legal heirs will have to present the following documents, for instance:

  1. The death certificate of the deceased person to prove the exact time of the demise,
  2. Details of the residence of the deceased
  3. Details of the property in question
  4. Birth certificate of the legal heirs to disclose their details,
  5. Copy of the ration card of the legal heirs,
  6. Bank statement of the legal heirs etc.
  7. Absence of any obstruction towards the grant of the succession certificate.

These documents are mandatory to prove that the legal heirs are indeed the rightful successors of the property in question

  • Original property purchase deed as well as the registration documents:
    In case of an old property, the original property purchase deed might not be available.
    In such a situation, the inheritor would be required to obtain certified copies of the title deed from the jurisdictional Registrar's office under whose jurisdiction the said property is present.
     
  • Certificate of encumbrance:
    An encumbrance certificate is a compulsory document applicable in transactions of property as a proof of free ownership/ title. Besides this, an encumbrance certificate registers and reviews all the transactions that occur in connection with an immovable property be it a sale, gift, lease, mortgage, partition, release, etc. The encumbrance certificate for property can be acquired from the Sub-Registrar office where the property in question has been registered.
     
  • Khata:
    A Khata is primarily a revenue document (official record), describing the evaluation of a property, indicating entire details of the property such as its size, built up area, location and so on in the records of the Municipality/ Corporation for the objective of payment of property tax.

A khata further contains additional details like the name of the owner of the property, type of property, details of taxes paid/ to be payable etc. against the property. A khata is fundamentally a piece of evidence of who owns as well as possesses the said property. Apart from this, a khata is also a type of identification of the person who is essentially liable to pay property tax for the property concerned. Additionally, a khata is one of the key documents that are required when the owner of the property needs a trade license or a building licence or a loan from a bank or any other financial institution.

Different ways to transfer an immovable real estate asset in India

In India, the real estate sector is undoubtedly one of the most desired investment substitutes. A person can purchase/ procure immovable property in numerous perspectives, and there can be a lot of occurrences when the person desires to transfer the ownership of property to someone close like family/ friends etc. In India, the most popularly used method to transfer or acquire a property is via the execution of a sale deed, which is commonly called transfer deed. However, the same may not be a cost- effective or a tax- efficient method.

There can be also be events like the time a property owner might want to give up his/ her share in the property to his/ her sibling or children. In such scenarios, transfer of property via a gift deed can be the most satisfactory option available. Another possible scenario can be, if the NRI would like to guarantee that his/ her equity is given to his/ her beneficiaries according to his/ her choice, getting an execution of Will can be a good option to consider.

Different ways of transferring or acquiring property assets in India

  • Through a valid Will
  • Through the laws of inheritance in India
  • Through relinquishing ones right in the property
  • Through partition of properties or settlement between parties
  • Through gift or
  • By simply selling the ownership of the property

Sale Deed

Currently the most popular mode of transfer of property in India. If an NRI holds a property and desires to sell it outright for an appropriate consideration (sale value), then an execution of sale deed is a great option to consider. Under the Indian property laws, enrolment of the sale/ transfer deed is obligatory, and as soon as the sale deed gets enlisted in the Sub- Registrar office, the property ownership gets transferred to the new property owner.

Gift Deed

A gift can be in the form of money (cash), cheque, house, land, building, property, shares, jewellery, or any utility good etc. which is received instinctively, or simply an asset obtained without having to pay for it, which is a capital asset for the person getting it. A gift can be cash or a movable property or an immovable property. In case the NRI wishes to gift the property he/ she owns to any of his/ her blood relatives, then a gift deed can be utilized. Additionally, in the event of an immovable property, it is necessary to register the said gift deed under Section- 17 of the Registration Act, 1908.

Any transfer of property by a gift deed is inevitable. This is because, when a gift (in the form of a land/ property) has been gifted to someone, then the same belongs to the person who has received the gift and once the transfer has been done then the NRI (current case) cannot switch back the transfer of the gift or even seek monetary compensation. Apart from this, a gift deed is an economical mode of transferring the ownership of property.

Relinquishment Deed or Discharge Deed

In case there are several owners of assets, and in case 1 of the co- owner wishes to transfer his/ her rights in the property to another co- owner then this can be executed by a relinquishment/ discharge deed. The transfer of property via the Relinquishment Deed can either be for consideration or be without consideration i.e. without the exchange of money, for instance, a gift deed, this transfer is also inevitable.

Settlement Deed or Partition Deed

A Partition Deed is executed by the co-owners of the property when an order of the court or the local revenue authority has to be executed. On the other hand, in case of a Settlement Deed, the property is owned by a 3rd person and is settled for persons who do not have any prior interest in that property and the share in the property of the heir is as per the wishes of the settler.

Contrary to a Will, a settlement deed is a non- testamentary report which instantly becomes operational. While a Will is a testamentary document which becomes operational only after the demise of its owner. Furthermore, a Will is a revocable document which can be amended by the testator whenever he desires to do so, while a Settlement deed is unchangeable.

Inheritance or Will Deed

A person can obtain a land/property through inheritance or though a Will. In case a person dies intestate (without making a Will) then the land/ property gets transferred according to the Laws of Succession as prescribed in India. Inheritance of property or a Will deed can be reversed by the Testator (person transferring the property) any time during his/ her lifetime. According to this, the beneficiaries of Will only get to enjoy the possession rights in a land/ property after the demise of the Testator and not before that. Besides this, post the demise of the testator, person getting the property through the Will deed or inheritance may not enrol the property in their name.

However, the new owners are required to apply to the concerned nearby civil authorities with the copy of the Will, the Succession Certificate and the death certificate of the Testator to complete the transfer of property procedure executed in his or her name.

Post the demise of the owner of the land/ property, his/ her successors, such as wife/ husband, children whether a male or a female, unmarried or married may, as specified by the individual laws, get the Patta or Khata transferred on the production of the death certificate of the owner/ testator with entire details of the transfer of property held by him/ her.

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