An overview of Income Tax Rules pertaining to properties is as under:

SECTION 24 (2): Interest Deductions - The budget presented by the Finance Minister for the year 2001-2002, has increased the ceiling on the amount of deductions from Rs. 1,00,000/- up to Rs.1,50,000/- from an individual's income if it is self-occupied for the interest paid for a home loan.

SECTION 54 F: The income tax act gives a person who does not own a residential house a concession to purchase one when they sell a capital asset. If you sell a capital asset, normally, you are required to pay tax on the gain in the value of the asset after indexation of the cost. If however you do not own a residential house, you can reinvest the net consideration you received from the sale of the capital asset in a house property and not pay any income tax on the gain from the sale of the capital asset. There is however a time frame within which to reinvest the funds from the gain of the sale of the capital asset.

SECTION 54: Reinvestment of House Property - An individual or HUF reinvesting the net proceeds from the sale of a house in another residential house is exempted from Capital Gains Tax u/s 54, provided the new house is purchased within 2 years after or one year prior to the date of transaction.

SECTION 139 (1) : All persons whose income is below taxable limits in occupation of immovable property exceeding 800 sq.ft. Residential Property or 125 sq.ft. Commercial Property, are required to file Form 2(C ) with the income tax (for Pune city).

SECTION 88: Repayment of the principal of a home loan up to Rs. 20,000/- is eligible for deduction under Section 88 whereby 20% (i.e. Rs.4,000) can be deducted from the total amount of tax payable.

Ans. On refusal to register the document by the Registrar, the parties or their representative/s u/s. 72 & 73 of the Indian Registration Act, 1908 can within 30 days from the date of order or refusal, institute proceedings in the Civil Court in whose jurisdiction the office of the Registrar is situated.

Ans. Yes, it is always advisable to register the document/s at the time of purchase of immovable property. In some cases it is compulsory to register the document/s. Even in cases where it is not compulsory to register the document/s then also registration of document/s is strongly recommended because:-

(1) The title gets additionally secured

(2) If you propose to obtain a loan in future then at that time banks or financial institutions might insist for registration of documents/s

(3) Even if you propose to register the document/s in future there is a possibility that the seller may not co-operate with you.

(4) The certified true copy of the document/s can be obtained from the registering authorities after completion of index and at any point of time and even if you loose the document/s you can still establish your bonafide to the property.

Ans. The Registering Authorities insist that the area must be mentioned as built up area. If the vendor has mentioned the area as carpet area then the registering authorities compel the persons to mention the area on built-up basis on the rubber stamp which is affixed by them at the time of registration of the information insisted upon by the registering authorities before registering the document/s is as under:-

(a) Number Of Floors (b) Built-up Area (c) City Survey No. (for the city of Mumbai) C.S.No. (for suburbs in Mumbai) (d) Ward (e) Village & (f) Taluka.

 

1. The Title Report

Colloquially known as the 'property card' or in some places 'saat-bara', this is an investigation into the title of the land over a period of 30 years. It ensures the marketability of the land in the hands of the original owner. Ask for the detailed report, not merely an abbreviated certificate. This should be prepared for the seller by his lawyer & should be checked by your lawyer. If the title is not clear you can be evicted from the property at a later date.

If you are buying a new house, ask for an Allotment Letter or Development Agreement detailing the agreed price, payment & construction schedule, house plans, delivery date & builder's liability in case of late completion or problems after possession. Make sure that the developer has clear title to the land, & that the relevant local authorities have approved the building plans. Once construction is over, ask for the completion & occupation certificates, which indicate that the building has adhered to municipal requirements. Some other costs you will incur: society formation charge, transfer charge, deposit for electricity meter, charge for registration of agreement.

Make sure that the seller has the title & possession of the property as well as the right to transfer the property. Check that the relevant approvals, if any, have been obtained from the land development/planning authority & the Income tax department. Ensure that there are no tenants & get a declaration that the property was purchased from the seller's funds & is not mortgaged. Place a notice in the newspapers about the proposed purchase. Get a No Objection Certificate from the builder or society. Check that dues such as property tax, society, water & electricity bills etc. have been paid in full. Decide who will pay society transfer charges. Take possession of all relevant documents & also the original allotment letter, completion certificate, occupation certificate and all other documents given by the original builder.

 

It is an important aspect to arrive at a bargain while deciding to purchase an immovable property. Besides making own assessment from the market, assistance of Government approved valuers may also be sought. A comprehensive valuation report indicating value of each of major assets and also the basis and manner of valuation must be obtained from approved valuer against payment of his fee. Reputed approved valuers have set up their offices in all the important cities in India. In case of plantation, valuation report may also be obtained from recognised private valuers.

This is the most important aspect of a purchase transaction of an immovable property and may be competently handled by a reputed lawyer/solicitor/chartered accountant etc. The verification is necessary from following two angles:

i) Validity of Title: The vendor must have a clear, valid and marketable title over the immovable property which is the subject matter of transaction. This would require a close scrutiny of documents of title produced by the vendor. The document must be a registered document.

ii) Obtaining of Non-encumbrances certificate.

3. EXECUTIVE OF "AGREEMENT TO SELL": An "Agreement to Sell" may be executed once the contract for purchase of immovable property has been finalised. Besides that, value of the property, the "Agreement to Sell" must provide about the payment of transfer fees, stamp duty and registration fee which differs from state to state and is quite substantial. This may either be payable by vendor or the buyer or may be shared equally by the two as per the agreement. The final sale would however, be subject to buyer obtaining permission from Reserve Bank, where necessary, and seller obtaining permission of competent authority under Urban Land (Ceiling & Regulation) Act, 1976 where necessary. The 'Agreement to Sell' does not require compulsory registration even if it contains recital of the payment of a part or whole of the purchase money.

A ceiling on holding of urban vacant land has been imposed under the above Act. The limit depends upon the category of urban agglomeration and between five hundred square meters to two thousand square meters. The limit in cities like Delhi, Mumbai, Kolkata & Chennai is 500 square meters. Section 26 of Urban Land (Ceiling & Regulations) Act 1976 requires a notice to be given to the competent authority as prescribed under the Act before transfer of any land within the ceiling limit by way of sale, gift, mortgage or lease. The competent authority may exercise an option to purchase the land for the Government and the sale can be effected only if no such option is exercised within 60 days from the receipt of notice.

Home loans are usually accompanied by the following extra costs:

1. Processing Charge: it's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount received by you cannot be less than the processing fee.
2. Prepayment Penalties: when a loan is paid back before the end of the agreed duration a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre paid.
3. Commitment Fees: some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.
4. Miscellaneous costs : it is quite possible that some lenders may levy a documentation or consultant charges.
5. Registration of mortgage deed.

There are a variety of home loans available in India, offered by various financial institutions like Banks and Housing Finance Companies. They are :-

Home Purchase Loans: There are the basic home loans for the purchase of a new home.

Home Improvement Loans: These loans are given for implementing repair works and renovations in a home that has already been purchased by you.

Home Construction Loans: These loans are available for the construction of a new home.

Home Extension Loans: Are given for expanding or extending an existing home. For example addition of an extra room, etc.

Home Conversion Loans: Are available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some extra funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need for pre-payment of the previous loan.

Land Purchase Loans: These loans are available for purchase of land for both home construction or investment purposes.

Bridge Loans: Bridge Loans are designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.

Balance Transfer: Balance Transfer loans help you to pay off an existing home loan and avail the option of a loan with a lower rate of interest.

Refinance Loans: These loans help you pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present home.

Stamp Duty Loans: These loans are sanctioned to pay the stamp duty amount that needs to be paid on the purchase of property.

Loans To NRIs: Are tailored for the requirements of NRIs wishing to build or buy a home in India.

EMI is the Equated Monthly Installment payable till the loan is paid back in full. It consists of a portion of the interest as well as the principal.

Some of the Incentives Offered Lending Institutions

a) Some companies sanction the loan without requiring you to identify a property as a prerequisite for  eligibility.

b) Free accident insurance

c) Discounts

d) Waiving of pre payment penalty

e) Waiving of processing fee

f) Free property insurance

Latest salary slip (proof of income for salaried individuals)
Photographs
Proof of age
Identity papers
Proof of residence
Bank statements for the previous six months
For self employed, certified copies of balance sheet, profit and loss statement and tax challans for the previous 3 years
For partnership/private limited companies, the Articles of Association, partnership deed and details about the firm

Before disbursement all documents pertaining to the property, including the agreement for sale is required to be handed over to the lending institution.

Both principal as well as interest attract tax benefits. Section 88 of the Income Tax Act allows a 20% rebate on the principal repaid, subject to a principal ceiling of Rs. 10,000 per annum. For loans availed after April 1, 1999 a deduction on interest paid with a ceiling of Rs. 75,000 is allowed. For loans availed before April 1999, a deduction on interest paid with a ceiling of Rs. 30,000 is allowed.

Home loans taken to repay existing home loans are not eligible for tax benefit.

1. A member, desiring to transfer his shares and interest in the capital/property of the society, shall give 15 days notice of his intention to do so to the Secretary of the Society in the prescribed form, along with the consent of the proposed transferee in the prescribed form.
2. On receipt of such notice, the Secretary of the Society shall place the same before the meeting of the Committee, held next after the receipt of the notice, pointing out whether the member is prima-facie eligible to transfer his shares and interest in the capital/property of the society, in view of the Provisions of Section 29(2)(1) of the Act.
3. In event of ineligibility of the member to transfer his shares and interest in the capital/property of the Society, the Committee shall direct the Secretary of the Society to inform the member accordingly within 3 days of the decision of the committee.
4. If the Committee is satisfied that the member is prima facie eligible to transfer his/her shares and interest in the capital/property of the society, the Committee shall direct the Secretary of the Society to inform the member within 3 days of the decision of the Committee to make the compliance as under:

Note: The condition at Sr. No. (vii) above shall not apply to transfer of Shares and interest of the transferor in the capital/property of the Society to the member of his family or to his nominee or his/her legal representative.

The transferee shall be eligible to exercise the rights of membership on receipt of the letter in the prescribed form from the society.

Property owners often worry that tenants will be like the camel that asked the Arab for shelter only to nudge him out of his tent by morning. With various state rent control laws yet to be amended in order to be more equitable for property owners, an extra dose of caution is called for before handing over the keys. In the light of innumerable instances of tenants' sub-letting premises, using the pugree system or going to court to take advantage of long-winded litigation procedures, here are some pointers to make sure that rent income does not insidiously change to cost. Here, the rules of the game partially depend on who the other side is - a company lessor or individual tenant.

Vet the company. No point leasing to a company that is broke. Big names do not automatically imply a model tenant. Sniff around for a good track record of timely payments.

Draw up a daunting contract. Wherever possible, set the security deposit at a third of the flat's cost and collect six months rent in advance. Include a clause, which quadruples rent if the company does not vacate once the contract ends.

The company's nominee occupant should be named. If the employee quits during the lease period, the flat should revert promptly to the owner.

Push for a copy of the occupant's employment contract, which specifies the contract period.

The Company must give a corporate guarantee from its head office ensuring that the flat is handed over at the end of the lease. In case, the guarantee is not available take a letter of comfort from the concerned branch office, which will act as proof that the company has rented the house.

Sound legalese in drawing up the contract is a must.

Specify that subletting is prohibited irrespective of whether it is a company or individual lease.

While big corporates may prefer a three-five year lease, residence owners usually prefer the relative safety of a leave-and-license agreement, which ensures periodic renewal of the terms. The eleven-month agreement is usually popular as these pre-empt the rent control laws, which apply after 12 months. Rent control laws, as said earlier, weigh in favor of tenants.

Specify the notice period for either side.

Property, where rent is over Rs. 3,500 is subject to the Transfer of Property Act (TPA) and not the rent control laws of the various states and metros. The TPA comes under the civil court while the rent laws are heard by the Rent Controller at the district level. If you want to evict errant tenants the TPA is much better as it has a broad scope for eviction unlike the latter which sets out barely 12 causes.

There is a silver lining yet for harried landlords. If passed, Delhi's pending Rent Control Bill would enable house owners to remove tenants who have stayed for over 10 years without paying market rates. Section 13A2 was introduced in the Bombay Rent Act a couple of years ago which allows the landlord to double the rent if the tenant does not vacate or is ruining the property. Its advocates also say that if the Urban Land Ceiling Regulation Act is abolished, landlords would be on firmer ground. There's still hope for all property owners!