Property law in India and its relevance for NRIs

Property law in India and its relevance for NRIs

Property law in India is a vast subject. It is a study under various statutes like The Transfer of Property Act, The Indian Contract Act, Registration Act, Indian Stamp Act, RERA, Land Acquisition laws, etc. Apart from these, for NRIs, special rules and regulations are provided under FEMA by RBI.

Property can be moveable, immovable, tangible or intangible.

There are various property-related activities like an investment in a property through sale and purchase, renting out a property, registration of property documents, updating revenue records and municipal records, exchange and transfer of ownership of property, etc.

Recommended reading:  How to File a Claim as Financial Creditor Before NCLT

Many top lawyers, including property lawyers and property management companies, offer services to deal with such activities. There are property lawyers in India, assisting in property-related documentation and transactions and settling legal disputes if the need arises.

Property law in India covers a lot of areas. Some of the everyday activities relate to:

  • Under property law in India, real estate investment is a significant area. It has been an attractive option for NRIs and serves the dual purpose of maintaining a connection with roots and profit-making. NRIs are permitted to invest in residential and commercial properties just like any other resident Indian. But for agriculture and plantation, the requirements are different. For promoting the buying and selling of the real estate, the Government provides different loan options through banks and other financial institutions. NRIs have to be aware of the regulations made by RBI under FEMA for the sale and purchase of the real estate, payment as well as repatriation of sale proceeds.
  • For the purchase of property by NRI, money is remitted through proper banking channels. Funds maintained in NRE/NRO/FCNR accounts can also be used. A loan facility is available to buy a house and banks transfer the amount directly to the seller or developer’s account.
  • Intangible property like shares, bonds, and intellectual property rights like patents, copyrights, etc. are also a part of property law in India. NRIs can invest in Mutual funds, Government Securities, Bonds, Equity and Hybrid Funds, etc. Investment in Mutual Funds offers higher returns as compared to investment in Fixed Deposits but is subject to market risk. Mutual Funds Investment is regulated by SEBI (Securities Exchange Board of India).
  • Other property matters concerning NRIs like title search, especially in case of agricultural properties, transfer of ownership in case of inherited properties, settling the issues related to distribution or partition of joint properties or ancestral properties, etc., all come under the purview of property law in India. 
  • Most property-related transactions can be done by NRIs either by personally visiting India or through a power of attorney.

Recommended reading: Tax for NRIs on gifts of money and property

We have top lawyers, property lawyers, and property management companies taking care of such investments/property matters for NRIs.

The relevance of property law in India for NRIs

The property market in India offers unlimited investment opportunities for NRIs. All investments made in India should abide by the respective laws. There is no doubt that property law in India is relevant for NRIs. Ignorance of the law is no excuse. It is vital to protect and safeguard the huge amount of investments which NRIs make. There has to be clarity of rights and government policies. NRIs need to remain updated on property law in India.

For any investment in property by NRIs, property laws, TDS rules, and tax implications go hand in hand. NRIs must be aware of the tax implications of all the property transactions they wish to undertake. Rules and regulations under FEMA have to be followed. It is imperative to comply with all the legal formalities to avoid any dispute later on.

Property Management Companies help NRIs to manage their property in India while staying in their native place.

Recommended reading: Landlord’s death does not affect eviction order

NRIs face many questions when it comes to property-related transactions in India. Some of the most common queries are:

Experts in the legal and financial field, including property lawyers, are available to assist NRIs in understanding the property law in India and helping them sail through the process.

HUF property and its partition by Coparceners

HUF-property

HUF or Hindu Undivided Family, consists of several members related to each other through a common ancestor. Coparceners are a small unit of four generations of lineal descendants of a common ancestor within this family. The property held jointly by the members of the family is called HUF property, and only the coparceners can seek partition of the same.

What does HUF actually infer? 

It is a family comprising of lineal descendants of a common ancestor and their wives and unmarried daughters. Its creation is automatic when the person gets married. A child is integrated into it at the time of birth. It cannot be formed by a single person but requires at least two. 

Any number of persons can be members of HUF. They may have a remote relationship with the common ancestor and are connected through:

  • Marriage
  • Birth 
  • Adoption

Coparcener

A coparcener is a member who acquires right in the HUF property by birth. The coparcenary is formed of four male lineal descendants and also consists of collaterals, i.e. uncles, cousins and so on, within this four generation. Wives are not coparceners. 

After the amendment in the Hindu Succession Act, 1956, in the year 2005, daughters are also coparceners. 

The concept of HUF property

For existence of HUF, it is not necessary that there should be a joint estate. It can exist without any property. 

There is a legal presumption that the property of the Hindu Undivided Family is joint. Its income belongs to all the members. If a member claims to hold separate property, the same has to be proved.

Read: Partition Lawsuit

The Income Tax Act recognizes HUF as a separate entity. A PAN number separate from its members is allotted to it. The income is taxed separately from its members. 

HUF can acquire property in any of the following manners: 

  • Gift
  • Will
  • Ancestral Property 
  • Property purchased by paying sale consideration out of HUF income
  • Property added in the common pool

Each member has a right to maintenance from the joint property

Partition gets affected:

  • By agreement to divide the property
  • By filing suit
  • By giving notice: The coparceners can give notice of his intention to severe his share from the HUF property.
  • Partition by conduct: The conduct like severance of business, severance of residence (house), severance of income and expenditure, is a clear intention of a coparcener to sever ties with the HUF.
  • By Karta: The Karta of the family can seek partition and divide the property
  • Automatic severance: When a coparcener converts to another religion, there is an automatic severance of that person from the HUF. But other remaining members continue to form HUF.

Read: Property Title Search

Total and Partial Partition

In total partition, the joint family status comes to an end, and the members get separated with their share. 

In partial partition, only a few members get separated, and others remain joint. Or there is a separation of some properties, and other remains intact.

Partition under the Income-tax Act is recognized only if it is full both as to the property and the persons.

Share of each coparcener fluctuates with the addition and deletion of members by birth and death.  After partition, the coparcener becomes the absolute owner of his share and is free to dispose of the same. In case he dies intestate, the share passes to the legal heirs as per the Hindu Succession Act.

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How to file a partition suit for a property in India

how to file a partition suit for a property in india

Partition is a division of property among those who are entitled to the same. In case of property held jointly, if all the co-sharers decide mutually among themselves to divide the property and agree for specific share, there is partition by mutual consent. If there is a dispute, the parties file a suit for partition in a civil court.

Existence of a Right:

A person can claim a share if he has a right in the property. The right can be there:

  • As a legal heir
  • As a co-owner/co-sharer
  • Through any document conferring the share – Will, Gift Deed, Sale deed etc.

When the partition suit is filed, Court may fix an enquiry and appoint a Court Commissioner to ascertain the existence of the right of the party and its share in the suit property.

Read More: Division of property between brother and sister after father’s death

Process of filing a partition suit:

Partition suit is a civil suit, and the process of filing is the same as that of a civil lawsuit.

A. Drafting and filing of plaint – A plaint is nothing but a statement of facts of the case wherein the claimant explains and justifies his claim for the share in the property.

  • A plaint is drafted as per the formats applicable in a particular court. Generally, it is the same everywhere in India with a few differences in presentation.

B. Affixing the appropriate court fee – Requisite court fees must be deposited at the time of filing the plaint. It is essential to submit an accurate court fee. The court fee depends upon :

  • Nature of the case- If the parties are in joint possession of the suit property, the amount of the court fee is fixed. The court fee does not depend upon the market rate. If the party is not in  possession, the court fee is paid on his share as per the market rate.

The court fee structure varies from State to State.

Read More: Division of Property Among Daughters and Daughters-In-Law

C. Placing on record the relevant documents: The party in support of its claim submits the relevant documents. The documents can be-

  • Title deed – It is the primary document which confers the title to justify share in the joint property. It can be in original. If original not available, certified copy can be obtained.
  • Valuation of property- A certificate is issued by the Office of Sub Registrar confirming the value of the property as per the market rate.

Any other document can be filed, which establishes the right in the suit property or which fails the claim of the defendant.

The party filing the suit may or may not possess the original documents. Certified copy of the same can be obtained from the offices of concerned authorities.

Read More: Property rights of a wife after husband’s death

Who can file?

Any or all of the co-owners can file a partition suit. The co-owners can be legal heirs also if it is a family property. Anyone having a share in the property which is intended to be partitioned can file the suit.

Where to file?

A suit for partition is filed in a Civil Court having jurisdiction over the area where the property is located.  If there are several properties, the lawsuit can be filed in any one of the courts.

The partition suit results in a decree which ends the joint nature of the property. Court may order sale of the property and distribution of sale proceeds.

Division of property between brother and sister after father’s death

Division of property between brother and sister after father death

Under Hindu Law, brother and sister are at par when it comes to the devolution of property of a father dying intestate.

When a Hindu male dies intestate (without leaving a will), his property devolves upon the legal heirs as per Section 8 of the Hindu Succession Act, 1956. The legal heirs are as follows:

  • Class I heirs
  • Class II heirs (if no one in class I)
  • Agnates (if no one in class II)
  • Cognates (if no one in agnates)

Class I heirs as mentioned in the Schedule of the Act are:

  • Son
  • Daughter
  • Widow
  • Mother
  • Son of a pre-deceased son
  • Daughter of a pre-deceased son
  • Son of a pre-deceased daughter
  • Daughter of a pre-deceased daughter
  • Widow of a pre-deceased son
  • Son of a pre-deceased son of a pre-deceased son
  • Daughter of a pre-deceased son of a pre-deceased son
  • Widow of a pre-deceased son of a pre-deceased son
  • Son of a predeceased daughter of a predeceased daughter
  • Daughter of a deceased daughter of a predeceased daughter
  • Daughter of a predeceased son of a predeceased daughter
  • Daughter of a predeceased daughter of a predeceased son

There are 16 class I heirs. Eleven are females, and 5 are males.

Rules for distribution of property among brother and sister (both are class I heirs):

  • Class, I heirs get their share simultaneously and to the exclusion of others. As per the rules, son and daughter (brother and sister) are entitled to an equal share in the property.

e.g. a father dies leaving behind a mother, a widow and one son and two daughters, his property would be divided into five equal parts, and each of these legal heirs will get a one-fifth share.

Stepson or stepdaughter: Daughter and son must be natural or adopted children. Stepchildren are not included in the definition of son and daughter under the Act.

  • Children of predeceased son or daughter will take between them one share, e.g. If the daughter is predeceased and has two children, then in the above example, the property is divided into five parts, and one-fifth share of the deceased daughter will be shared further by these two children equally.

Ancestral or self-acquired property

The daughter (sister) has equal right as a son (brother) in the ancestral as well as the self-acquired property of the father.

Under Hindu law, there is a concept of coparcenary. It is a small unit within a joint Hindu family and consists of male lineal descendants’ of four generations with the eldest male member as the head and his male lineal descendants as coparceners. After the amendment of 2005 in the Act, the daughters are considered as coparceners and have equal right in the ancestral property as a son.

Marital Status: Marital Status of the daughter (sister) makes no difference.

Date of birth of a daughter (sister): The Amendment of 2005 came into effect on 09.09.2005. The daughters born before or after this date are considered as coparceners.

If the daughter is not living on 09.09.2005, her children are entitled to get a share in ancestral property.

If the father is not living on 09.09.2005, the daughter cannot seek partition of ancestral property.

Testamentary succession: However, in case of self-acquired property of the father, he can make a will of the same as per his desire, and the property bequeaths to the person named in the will.

In the case of ancestral property, a Will can be made by a father once he has acquired his share.

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Division of Property Among Daughters and Daughters-In-Law

Division of Property Among Daughters and Daughters-In-Law

Daughters and daughter – in – laws are on different footing when it comes to shares they receive on division of property in a family. Devolution of property by inheritance or succession is influenced by personal laws and is governed by various statutes.

Position of daughters: Equal right as a son

In the case of Hindus (Jains, Sikhs and Buddhists) division of property is governed by Hindu Succession Act, 1956.

Hindu law recognises the concept of a Hindu Undivided family. Only males up to four generations (lineal descendants from a common ancestor) are coparceners, and all others are members of the family. After the amendment of 2005 in the 1956 Act, daughter whether married or unmarried is a coparcener. After marriage, daughter ceases to be a member of father’s HUF but still, she is a coparcener. A daughter has the rights and liabilities of a coparcener.

  • She can demand partition, has a birthright in the undivided family property.
  • She can be a Karta also, i.e. head of the family if she is the eldest coparcener.
  • If the daughter dies intestate, her share in the HUF property passes by succession to her legal heirs as per section 15 of the 1956 Act.
  • A daughter is a coparcener but a daughter in-law is only a member of joint family.

In case of self-acquired property of the father, son or daughter has no birthright in the same. If the father dies intestate, devolution of property takes place as per rules of 1956 Act under which daughter is covered as Class I heir and has an equal right along with son and other legal heirs.

Read: Do grandchildren have a right to their grandfather’s property?

Daughters also have a share in mother’s property. Daughters and sons have equal rights in the property of their mother.

Position of daughter- in- law: Limited Rights

A daughter in law has no right in the ancestral or self-acquired property of her in-laws.

After the death of her husband, i.e. as a widow, she has the right in her husband’s property left behind by him. This property can be either ancestral or self-acquired. The right acquired by her is as a widow of the deceased husband.

Thus if a father dies intestate, a daughter has an equal right in his property along with her brother, but the daughter in law has no right in the property of her father- in law till the time her husband is alive. After the death of her husband, she is entitled to get the share in the property of her husband along with his other legal heirs.

Read: Property rights of a daughter in a hindu family

The daughter in law has a right to residence only till the time matrimonial relationship exists with her husband. The right of residence is there even if the house is a rented accommodation. If the property is a self-acquired property of her father in law, daughter in law has no right of residence as the said house is not shared house because the husband has no share in it.

A widowed daughter in law has right of maintenance from her father in law under certain conditions only, as prescribed in Hindus Adoption and Maintenance Act, 1956.

Division of property:

When there is a division of property in a joint Hindu Family, the daughters enjoy equal right along with sons. The daughter in law has no right in the property of her in-laws. She acquires rights to the in-law’ property only through her husband.

The daughter in one family becomes daughter in law in another family after her marriage. She has full rights in the property of her father even after marriage but limited rights in the property of her in-laws.