What is mutation of property and why it is important for buyers?

What is mutation of property & why it is important for buyers

From a buyer’s point of view, it is imperative that the property he intends to buy has a clear and undisputed title. The onus to verify the title of the property is on the buyer. It requires well-maintained land record/municipal records where all the past transactions related to the property title are duly recorded. It is possible if mutation is done diligently.

There are certain documents which establish property ownership:

  • Registered documents transferring the title, e.g. sale deed
  • Survey documents
  • Land records
  • Property tax receipts

Apart from the registration of documents, there is mutation also, which reveals the owner of the property. Registration is a proof of ownership, but mutation is essential as it records the ownership with the authorities.

What is mutation?

Mutation means entering the name of the owner of the property in the revenue records maintained at the local level by the State. Whenever a property is transferred,i.e. there is a change in the ownership, the name of the new title holder is reflected in the revenue records when mutation is done.

The Government maintains the record as the same enables the authorities to tax thereal property owner.

When is mutation required?

Mutation is required whenever there is a change in ownership effected by:

Is it necessary to get the mutation done?

There are two types of mutation:

  • Mutation of agriculture land
  • Mutation of non– agriculture land

In case of agriculture land, mutation is necessary as the title passes to the new owner, only after mutation. If the Government acquires such land, the compensation is paid only to the person who is the owner as per land revenuerecord.

In case of non-agriculture land, the title of the owner is not affected if mutation isnot done. However, for payment of municipal tax, electricity connection, waterconnection, mutation becomes necessary.

How is mutation done?

An application is made to the Tehsildar with court fee stamp affixed on it. The documentation and fee for mutation differ from State to State.

What is the importance of mutation, especially for a buyer?

Since the onus to verify the title of the property is on the buyer, mutation is of greatsignificance to him. It is essential to get the mutation done because:

  • The Government looks into the land records to verify the actual owner for imposing taxes and for awarding compensation.
  • Mutation shows possession of the property.
  • Mutation is vital for further sale of the property.
  • Mutation helps to prevent the fraudulentsale by seller to more than one buyer.
  • Mutation helps the buyer to ascertain that the property is free from    encumbrances or if there is any liabilityto be incurred by him. 

However, mere mutation does not confer any title. Mutation is invalid if the document transferring the title is not registered as required in law.

It is important to note that mutation is not a onetime process. It needs to be doneregularly to ensure that the property record is clear.

It is always advisable to take legal help from lawyers to effect any transfer of property to avoid legal ramifications later and to ensure that all legal formalities are complied with. Lawyers can provide legal advice and assistance in case of mutation or for cross-checking the revenue records in case of purchase/sale of any property.

Tax implications on a gifted property

Gifting a property is a kind gesture, and it is better to be aware of tax implications for gifting a property.

We had a case where Mr Bhushan, an NRI was gifted with land situated in India by his father, a resident Indian. He wanted to know:

  • If a land in India can be gifted by his father who is a resident Indian
  • The legal requirements to complete this gift transaction
  • Tax implications

Our advice and guidance – Parties to a gift deed:

  • Donor (giver)
  • Donne (recipient)

Donor or Donne can be a Resident Indian or an NRI or a PIO.

Which property can be gifted: Any movable or immovable property like –

  • Land /Building
  • House
  • Jewellery
  • Shares and Securities
  • Paintings, Drawings, Sculptures – Any other work of art
  • Archaeological Collections

Agricultural Land, Farmhouse and Plantation Property in India cannot be gifted to NRI.

Legal Requirements for gift deed:

A gift is a voluntary transfer of movable or immovable property without consideration, by a donor to donne which is accepted by the donne during the lifetime of the donor. For a gift deed, we require:

  • Donor – voluntary transfer
  • Donne – acceptance of a gift
  • Property to be gifted in existence
  • Gift deed preparation
  • Registration of gift deed

Tax Implications:

Both Donor and Donne are charged with the payment of tax as per Income Tax Act, 1961, under certain conditions mentioned as below. Tax is levied in the year in which the gift is received.

Tax Implications

  • Any rent received by the Donor on a gifted property is added to his income for tax purposes.
  • For calculating Fair Market Value and Stamp Duty Value, it is better to take advice from a tax consultant

Exemptions from tax in case of Gift:

  • If the aggregate value of the gift is less than Rs 50,000
  • Gift received from the relatives (list of relatives provided in the Income Tax Act) – No tax irrespective of the value of the gift. In the case of Hindu Undivided family, all members are relatives.
  • On Marriage of the recipient
  • Gift received by will or inheritance
  • From local authority
  • From Charitable Trust/Find/Institution as per the provisions of the Act