My father and mother passed away without leaving any will. I have 2 brothers and 2 sisters. We already obtained a Succession Certificate after following all procedures which states 5 of our as legal successors. We got some land in Kerala. My brothers and sisters don’t want the land are ready to relinquish their rights in a partition agreement. In return, they want me to pay them the market value of the land for their shares as we intent to calculate equal shares. Please advise the procedure to be followed, income tax impact if I make payment as gift to my brothers and sisters as part of the partition agreement. What will be the registration charges for registration of the partition agreement.
Make a relinquishment agreement without consideration. That would be equivalent to a gift deed. Don’t make a gift deed as their heirs can challenge it in Court of Law. Relinquishment deed would be better. Even if gift deed challenged the order will be in your favor but avoid litigation and have a happy life.
Registration charges since its blood relative you save a lot of amount. Now since the land is in Kerala then stamp act of Kerala would be applicable.
Dear Sir,
Your brother's may execute relinquishment deed in your favor separately in addition to partition deed. You many mention about the relinquishment deed in the partition deed. Both deeds must be registered. The applicable income tax and registration charges may kindly be collected from the local lawyers.
If you are paying them market value of land then in deed of family settlement the consideration paid should be mentioned
2) deed of family settlement should be stamped and registered
3) registration fees local lawyer in Kerala can guide you
Is the consideration paid for relinquishing the right is treated as gift or income or capital gain under income tax?
Income tax will come later in effect. First when you execute gift deed you have to pay a stamp duty which is applicable as per ready reconer. It is less for blood relatives. If you later sell the land depending upon period you will incur long term or short capital gains tax. You have to show the said transaction in your current income tax return.
If you are paying a consideration for the release/relinquishment in question, this transfer cannot be under a gift deed.
Your brother's and sister's must pass on their respective shares in this property under a relinquishment deed to you. The component of consideration being paid to each of them must be specified in their respective relinquishment deeds. The deeds must be duly stamped and registered.
Any Settlement/ Partition deed executed amongst family members is Not a transfer and hence there is no liability of capital gains in these transactions
2) A Settlement/ Partition deed does not fall under the definition of "Transfer" as defined in section 2(47) of the Income Tax Act.
A family partition which results in an adjustment of shares and of the respective rights in the family properties is not a transfer in the eyes of law. When there is no transfer of asset, there is no capital gain and consequently there is no liability to pay tax on capital gains. In a family partition, a situation arises where an item of property is not capable of physical partition or is such that, if divided, it will lose its intrinsic worth. In such a case, with a view to ensure an equitable partition, the item is allotted to one party and he is asked to pay compensation in money value to the other party. This amount is called owelty. As the amount of compensation is only to equalize the inequalities in the partition it is nothing but a share in the immovable property itself (though paid in cash) and cannot be treated as income liable to capital gain.
your siblings can execute a relinquishment deed in your favor as they are the co - owners of the prperty. Relinquishment deed can be executed with or without consideration.It is mandatory to register a Relinquishment deed.
It needs to be borne in mind that transferring the property via a Relinquishment deed for a consideration will inevitably result in capital gains for the transferor and hence no tax benefit's would accrue to the transferor.
Relinquishment deed has to be executed on a stamp paper Rs 100 ,in the presence of 2 witnesses, before the Sub Registrar .
Nominal registration charges would have to be paid for executing the Relinquishment deed.
Stamp duty is the same for both Relinquishment deed and Gift deed and varies from state to state .
It is advisable that you consult a lawyer to draft the Relinquishment deed .
1. Pay the amount as consideration of the rights you receive; do not pay as gift.
2. It is best to execute a Deed of Partition with the share received by your siblings paid in cash by Cheque to four of them separately, and the cheque numbers to each of them entered in the said partition deed.
3. The total expenses for registration depends on the area of land, fairvalue of the said land, improvements in the said property, road access, and such other. The exact amount can be arrived at after the extent, survey numbers, village office , registration office are ascertained, and the nature of land as well.
1. the share in immovable proeprty can only be effected through a registered deed of transfer.
2. So to do this you will have to make a deed of gift or deed of relinquishment by the person who is releasing his rights and get it registered.
3. There is no immediate implications on income tax on this unless the proeprty is a source of income.
Hi, they can execute a gift deed in your favour.. The gift deed can be shown on paper without consideration and has a very less stamp duty
The better way is to go for family settlement deed and define the rights on the properties of the individuals. Please get the settlement deed signed by all the shareholders and through a civil suit the titles as agreed will be transferred in the respective names after the relinquishing share holder witness the deed. This will not involve any registration.
In other case the capital gain tax on the ancestral property will be calculated and payable in the hands of the receiver.
1. IF parents have died intestate "without making a will" of their immovable properties AND "IF" all is amicable to all the residual legal heirs, THEN instead of considering "relinquishment Deed" or "partition agreement", which is cumbersom, it would be ideal to duly execute a Stamp Duty paid Registered "Family Settlement Deed", with all the participating legal heirs and record all the dealings /compensations /separations etc.... via proper strategic clauses, for futuristic clear and irrevocable Title of the immovable properties.
2. Gift Deed is executable ONLY without any consideration.
Keep Smiling .... Hemant Agarwal
since ithe property is agricultural land, will there be any income tax liability if A. we execute a Partition Deed as follows: 1. Brother A relinquished the right with No compensation; 2. Sisters B and C are paid INR 10 lakhs each to relinquish their rights 3. Brother D gets 10 cents of land and paid INR 7 lakhs: and 4. Brother gets remaining land and he pays the above amounts to his brothers and sisters. B. What is the diff in income tax if same arrangement is registered as Family arrangement and if that is registered at sub registrar office or at court? C. What if everyone else relinquishes their rights for no compensation except brother just gets 10 cents as part of Partition agreement. Brother E signs gift Deed and registers separately and pay the above amounts. Appreciate your specific answers.
There is no liability to pay capital gains on partition of land
2) it is immaterial that land is agricultural land or not
3) number of judgments that in partition there is no transfer and hence no income tax liability
4) even if sisters are paid any compensation amount paid to them would not be liable to tax
5) it can be registered as family arrangement or deed of partition
Income from agricultural land is exempt but you have to pay the stamp duty if the gift deed is executed in your favour. Its the revenue of the government
It can be a partition deed or the siblings who do not any share in it and would like to relinquish their rights can execute a registered release deed in favor of others or there can be a registered family arrangement deed also.
All these processes would be cost effective.
The registration charges and the stamp duty are state subjects, which can be enquired locally
Is the consideration paid for relinquishing the right is treated as gift or income or capital gain under income tax?
It can be treated as gift but since consideration amount has been paid, the donor may have to treat this as capital gains and the taxes may be applicable accordingly.
There are no capital gains tax on agricultural lands.
Agricultural land in Rural Area in India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains.
Under Section 10(37) of the Income Tax Act, Capital Gains on compensation received on compulsory acquisition of urban agricultural land is exempt from tax.
If the entire property now being under the family arrangement is agricultural property, then it is exempt from income tax.
1. There is no income involved, and so there is no income tax.
2. The person paying up may have to produce the source of the money paid.
3. It is good to register the family partiution at the Sub Registrar Office concerned; if you prefer to partition the property through a court of law, the expenses would be higher - you have to pay the Court fees and the legal expenses and then register it before the Sub Registrar Office to have a Registered Title Deed; the Court Order need not be Registered before a Sub Registrar Office, but a subsequent purchaser may insist on a registered deed, and then you have to pay the registration charges of that time; moreover, the legal procedures are lengthy Instead, register the Partition Deed once the membersarrive at an amicable partition.
4. If any payment is made then do not go for a Deed of Gift. It is a Family Settlement, and properly can be named it as Family partition. Since the terms are almost settled between the members, it can be registered as a family partition, and then the person obtaineng the property would have a proper document as title deed.