9 points to check before buying flat or property

Dec 18 2018

Tax Treatment of Compensation Received by the Flat Owner from Re-developer of the Co-op. Housing Society

Dec 17 2018

In Mumbai suburbs, re-development of existing old buildings have become a big real estate activity as the Government permits additional floor area to be constructed which ranges from 2 times to 2.7 times of the plot area. To make the proposal lucrative, the developer offers existing member some additional area in the re-constructed area alongwith lump-sum money termed as corpus or compensation and also rent for a specific construction period.


Is this compensation/ rent taxable?


It has been a raising issue whether such compensation and rent received by a member of society is taxable or not under the Tax Act. The tax authorities have been taxing such receipts considering the same as taxable capital receipts, while the members’ contention has been that this compensation is towards hardships which the flat owner faces owing to the re-development activity. Thus, such compensation is in the nature of capital receipts which is not taxable.

In the recent judgement, the Mumbai Income Tax Appellate Tribunal in the case of Jitendra Kumar Soneja v/s. ITO held following the earlier judgment of Tribunal in the case of Kushal K. Bangya v/s. ITO that the compensation received by the owner of the resident flat in the society building is not taxable as the same is related to the Capital Asset and accordingly the same is outside the ambit of income u/s.2(24) of the Income Tax Act. It further held that, though the Capital receipt is not taxable as income, it shall end up reducing the cost of acquisition of flat and the same will be taken into account as and when the property is sold or transferred. Further, the Tribunal also held that any amount paid by the Developer towards rent shall be exempted only to the extent the same is spent towards paying rent till the owner has moved back to his original house. Any excess of receipt over the rent expense shall be taxable as income from other sources.

The judgment given by the Honorable Tribunal has tried to settle a controversial issue of taxation of compensation, but it is not going to be very easy as tax authorities will definitely challenge such decision in the Higher Courts. So, one wish the issue is somehow decided by the Higher Courts so as to give absolute clear map for taxation of such compensation received by the Flat owner.


Can you buy property from your father?

Dec 17 2018

Thinking of buying property from your father or someone in blood relation?

Wondering if Indian property law allows that?


Legally, yes you can buy property from your close relative. But it doesn’t make any sense to buy property from father as its better to take GIFT from him.

In India, the Gift Tax Act has been abolished . Any  gift from close relatives which includes father is exempt from tax. ( Read proviso to section 56 (2)(vii)).

Further , in Maharashtra, there in no stamp duty on transfer of immovable property to close blood relations which includes Father-Son.

Related ArticleWhat is stamp duty?

Have more doubts or questions related to property laws and tax? At Spacio Realtors, we’ll be happy to consult you. Our real estate advisory services are ISO 9001 certified and our office is headquartered in Mumbai, India.

Spacio also has a dedicated NRI Desk to assist Non-resident Indians and PIOs with all aspects of real estate including broker services, advisory services and property management services in Mumbai.

We look forward to helping you with your real estate needs. 


List of important Documents for Buying a Resale Flat

Dec 15 2018

Have you identified the most important set of documents that you need to buy a resale flat in India?

Have you had trouble finding out from where to procure these documents and whether they are mandatory to proceed with the deal to purchase the resale property?


In this article, I’ll list out the legal documentation requirement that a home buyer must add to his or her priority checklist and also communicate to the selling party so that there are no delays in the transaction.

1. Chain of all sale deeds

  • Significance: To trace ownership of the property.This document evidences sale and transfer of ownership of property in favor of the buyer, from the seller. It acts as the main property document for further sale by the buyer as it establishes his proof of ownership on the property. It is normally executed after execution of sale agreement, confirming that terms and conditions detailed in the sale agreement as agreed upon between the buyer and the seller are complied.
  • Mandatory
  • It is registered in Sub Registrar office in whose jurisdiction property is located and register it within 4 months from the date of execution.

2. Share certificate

  • Significance: It indicates membership of the current original owner in the society. Subsequent transfers are endorsed on the back of the share certificate. As per co- operative laws, the ownership of flat is identified with share certificate. Its the membership of society which gives right of ownership and occupation of the flat. It is the most important document to signify the ownership when buying a resale flat in India.
  • Mandatory
  • It is issued by the society in favor of the current original owner. If lost, a procedure as laid down in the Co operative by laws has to be followed like indemnity, newspaper public notice etc.

3. Bank clearance letter in case property has any bank loan

  • Significance: If you have taken a loan against the property than all the original documents relating to the property are kept in custody with bank. While selling such property, clearance letter is required from bank which is issued with conditions that specified loan of the bank has to be cleared before the original documents are handed over to the new buyer.
  • Required, if you have taken a loan against the property you are selling.
  • This letter is obtained from bank. If lost, it can be re issued by bank.

4. NOC from society

  • Significance: To certify that the society has no objection to transferring the share certificate in favour of the potential purchaser is needed if applicable. Any sale without NOC from the society may not be acknowledged by the society and raise complications in transfer.
  • Mandatory
  • It is issued by the CHS.

5. Title report

  • Significance: To ensure that compete chain of earlier sales are properly registered and if any government lien is marked on property. It is a report, not a legal document.
  • Not mandatory. Important especially in large ticket size deals specially relating to land.
  • Tittle search is taken from Registrar’s office.

6. Occupation certificate

  • Significance: To certify that the building has complied with the approved plans. Once the building is complete, the builder has to obtain an Occupation Certificate or OC.
  • Desirable. Property without OC is vulnerable. The property is not officially recognized and termed illegal by local authorities.

7. Car park

  • Now, builders have stopped issuing separate allotment letter of car park as its not legal to sell car park. But it is important to take confirmation of car park.

8. Municipal approved floor plan

  • Significance: It is full plan copy (floor plan) of that building and the wing you planning the purchase. It gives an idea about surrounding and spacing.The property one is buying must match with the approved plan.
  • Desirable

Round-up: Remember, you don’t want to get stuck with a property for the rest of your life that doesn’t have clear title or any other missing legal document that prevents you or your children from reaping the benefits in the long run. Due diligence is required when buying a property, but instead of getting overwhelmed by a long list of paperwork create your document checklist or hire a property consultant to guide you for the same.

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