As i mentioned in my previous post that i will write a separate article on Deed of Transfer of Rights. To understand the context & background of Deed of Transfer of Rights, I would request you to read the article How to Save Stamp Duty & Registration Charges before proceeding further.
Deed of Transfer of Rights is executed to legally bridge the transaction gap between Sale Agreement Value and Sale Deed Value if the property is registered at Guidance Value or Circle Rate. Taking forward the same example of Mr A, who bought flat in Delhi for 1 Cr but registered at 67 Lacs as per circle rate. Now Mr A need to show transaction of balance amount i.e. 33 Lacs to bridge the gap between Sale Agreement Value of 1 Cr & Sale Deed Value of 67 Lacs.
Mr A will execute the Deed of Transfer of Rights with the seller. 33 Lacs paid by Mr A under deed of transfer of rights is paid to the seller towards the miscellaneous cost i.e. cost of the fittings, fixtures with ultra modern materials including air-conditioning, interiors, wardrobes, wood work, kitchen cabinets, modular kitchen, bathrooms with luxury fittings and bed rooms and drawing room fitted with curtains, furnishings, and designed furniture, lights and imported lamp shades etc inclusive of all house hold articles together with all deposits made to Owners Association and including Corpus/sinking fund, club house membership, deposit made for electricity & water connections.
In laymen terms, Sale Deed is only for basic structure and through Deed of Transfer of Rights the “Seller” relinquishes all his right / claim over the above said deposits or benefits generated/arising out of the said deposit along with relinquishing his rights on all the materials, fittings, fixtures & furniture of the house to the purchaser. It cannot be executed for sale and purchase of Land / Plot.
The advantages of Deed of Transfer of Rights are as follows
1. Savings on Stamp Duty
2. Very Easy to execute on Stamp Paper of Rs 200
3. Registration of Deed of Transfer of Rights is not required
4. Deed of Transfer of Rights can be simply “Notarized” in front of 2 witnesses
5. Deed of Transfer of Rights is Legally valid document.
Few important points to be considered while making Deed of Transfer of Rights
(a) It should include complete payment details/breakup of total sale value. Even if payment details are included in Sale Deed then also mention in Deed of Transfer of Rights
(b) It should be executed only after execution of Sale Deed
(c) It should contain complete details of property
( d) Ideally, it should be signed by Lawyer / Doctor as a witness
(e) Deed of Transfer of Rights is valid in all States of India
Income Tax and Deed of Transfer of Rights
Maximum Income tax benefits from Deed of Transfer of Rights can be availed when it is executed both at the time of buying and selling of property. The income tax treatment vary from case to case basis and can only calculated after going through complete payment details of both buyer and the seller. Broadly speaking Deed of Transfer of Rights has following Income tax implications
From income tax perspective, buyer can reduce cost of acquisition of property to circle rate or guidance value which will help in saving Long / Short term capital gain tax at the time of sale of property. Only suggestion is that buyer should execute Deed of Transfer of Rights both at the time of purchase and sale of property to get max income tax benefits. Its dual benefit for buyer as buyer will save Stamp Duty at the time of purchase and save capital gain tax at the time of sale. Through intelligent planning, the tax outflow can be reduced considerably in property transaction.
Seller can reduce consideration value by executing Deed of Transfer of Rights. It will help in savings of capital gain tax. Any gain from Deed of Transfer of Rights is clubbed under “Income from other Sources” and is taxed at marginal rate i.e. as per income tax slab rate. Gain can be calculated net of difference between value of Deed of Transfer of Rights and cost of House Furnishing. Seller should have House furnishing bills to support cost of furnishing for tax calculation.
To download Deed of Transfer of Rights CLICK HERE
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