FAQs

As you buy a new home, these questions will answer all common queries about buying and owing a property in India. Use this guide to acquaint yourself with rules, laws and important information.

What is the difference between Built-Up Area, Super Built-Up Area, and Carpet Area?

Carpet Area: This is the area of the apartment that does not include the area of the walls i.e. the area of the apartment that a carpet can cover.

Built-Up Area: This is the area of the apartment that includes the area covered by the walls.

Super Built-Up Area: This includes the built-up areas such as the lobby, lifts, stairs etc. This term is therefore only applicable for multi-dwelling units, such as flat complexes.

What is the difference between the lease agreement and the Leave and License agreement?

A Lease, defined under Section 105 of The Transfer of Property Act, 1882, is a transfer of the right to enjoy the concerned property for a pre-defined time period or in perpetuity. The lessor (owner of the property) gives the lessee (the one leasing the property) such consideration periodically, usually at the beginning or end of a lease agreement.
License is defined in Section 52 of the Indian Easements Act,1882. License does not allow any interest in the premises on the licensee's part. It merely gives the licensee the right to use and occupy the premises for a limited duration.
A lease deed needs to be stamped and registered. The amount payable towards the lease deed's stamp duty is more than that payable towards the Leave and License's. For a period exceeding three years, the stamp duty is same for both agreements.

Are investments in real estate subject to tax implications under the Wealth Tax?

A person holding more than one residential property would be liable to Wealth Tax on the market value of the second property

What are the implications of entering into a lease agreement?

There are various implications of entering into a lease agreement such as you have to pay the stamp duty, the lease agreement has to be registered etc.

What is the definition of Non Resident Indian (NRI)?

NRIs can be defined as:
  1. Indian citizens who stay in a foreign country for employment
  2. Indian citizens carrying on their businesses or vocations
  3. Indian citizens abroad for any other purpose in the circumstances indicating a definite intention to stay outside India for an indefinite period
NRIs can also be:
  1. Indian citizens working abroad on assignment with foreign governments or international agencies
  2. Officials of central and state government and public sector undertakings deputed abroad on temporary assignments or posted to their offices abroad
  3. Indians who have settled abroad permanently or gone abroad on immigration
    Non-resident Indians become residents of India once they come back to India to engage in employment, for carrying on any business or vocation, or for any other purpose indicating a definite intention to stay in India for an indefinite period.

Are NRIs/foreigners permitted to own property in India?

NRIs / foreigners are permitted to own property in India in most of the categories. There are certain categories like agricultural land, land for housing project etc., wherein NRIs/foreigners are specifically not entitled to own property.

Why is it considered necessary to register a property? What is the purpose of registration?

By registering the transaction of an immovable property, it becomes permanent public record. Title or interest can be acquired only if the deed is registered.

Does a foreign citizen of non-Indian origin require permission from the Reserve Bank of India (RBI) for acquisition of immovable property?

Yes. The RBI may grant permission to a foreign citizen of non-Indian origin/foreign companies if the property is purchased for residential use and the consideration is paid by way of foreign exchange.

Why is it considered necessary to register a property? What is the purpose of registration?

By registering the transaction of an immovable property, it becomes permanent public record. Title or interest can be acquired only if the deed is registered.

Does a foreign citizen of non-Indian origin require permission from the Reserve Bank of India (RBI) for acquisition of immovable property?

Yes. The RBI may grant permission to a foreign citizen of non-Indian origin/foreign companies if the property is purchased for residential use and the consideration is paid by way of foreign exchange.

What are the taxation formalities I need to complete while purchasing a property?

From the point of view of taxation no special formalities are required for completing while buying the property. However, proper Agreement to Sale etc. must be done and the ownership and the title should be verified to ensure that one does not have a problem at a later stage in respect of such property.

What are the taxation formalities I need to complete while selling a property?

  1. Sale of residential accommodation may result in a short term capital gain/loss if sold within a period of 3 years or a long term capital gain/loss if sold after a period of 3 years from the date of acquisition (Section 29A, 42A and 47).
  2. A short term capital gain/loss will be treated and taxed in the same manner as any other income/ loss.
  3. Tax on long term capital gain can be avoided if the sale relates to a property other than one residential accommodation and reinvested in any residential property within a period of 1 year before or 2 years after the date of transfer (Section 54 F).
  4. Long term capital gain can also be saved if only the capital gains (and not the total sale proceeds) is invested for a period of 3 years in specific Bonds of National Highways Authority of India or Rural Electrification Corporation Limited (Section 54 EC).
  5. Determination of sale proceeds of a Property will be on the valuation adopted by the State Stamp Duty and Registration Authorities and not the amount mentioned in the Deed of Conveyance (Section 50C). This is intended to cover cases where part of the sale price is received by the seller in unaccounted cash.

With reference to the Bombay Rent Act, is there a prescribed percentage of tenants willing to form a society?

For instance, 70 per cent tenants out of a total of 32 tenants are ready to form a co-operative housing society.

Are there any new provisions?

There is no new provision in the new Rent Act regarding the prescribed percentage of tenants willing to form a society.

My wife & I have jointly taken housing loan for a single housing unit. Can we both avail tax benefits in our individual tax returns & how much?

Happy and relax and get the benefit of enjoyment of tax deduction for both of you. Please do remember that the benefit in respect of interest on loan as also on repayment of the housing loan etc. is allowed to each co-owner of the property. Hence, you as well as your wife will be able to claim the benefit of tax deduction in respect of interest on loan as well as on repayment of loan.

Who does a group of tenants of an old building approach to be able to form a society without the concerned landlord's permission?

Approach the Registrar of Co-Operative Societies and file the various relevant documents.

In case a tenant is not protected by the Rent Act, what is the procedure to ask him to vacate and what is the notice period that is required to be given?

A notice is sent to the tenant, failing which a court case may be filed. It usually takes 10 to 20 years to reach a verdict.

According to Income Tax laws, when is a person considered to own a house - at the time of allotment or at the time of possession?

The ownership for Income-Tax purpose would be when you receive the possession. Even if payment is not made but possession is received, it will be treated as a sale transaction.

With reference to the Bombay Rent Act, can tenants of an old building that was repaired by all the tenants in the year 1995-96 form a co-operative Housing Society without the landlord's permission?

Yes, tenants of an old, repaired building can form a co-operative housing society without the landlord's permission. Assume there is a lease agreement for 6 years for a shop with a built-in escalation clause at the rate of 20 per cent after 3 years. The lease expires on a specified date say, March 31, 2000 and the concerned landlord has sent a written letter. It is always advisable to make a new agreement with the landlord.