Properties in India are often jointly owned, which inevitably gives rise to disputes when there are disagreements among the owners. Due to the presence of multiple stakeholders, selling an individual share becomes a cumbersome process. This is largely due to the misconception that joint ownership means an equal share of the property.
Drafting a partition deed ensures that the property is divided legally, and each individual gains full rights over his or her share of the property to sell or transfer or gift it. In India, where a property is equally the source of both joy and much contention, it is important to know what constitutes a partition deed.
Here is a handy guide.
The need for partition deed
The need for a partition deed arises when the co-owners decide to part ways. It is one of the most common ways to divide the property share of each member in the case of inherited properties. Post division, each member becomes the independent owner of his share and is legally free to sell, transfer, or gift his share. As mentioned in the introduction, joint owners of the property do not have the right to sell to gift the property at their own will unless each party gives consent.
The division of share
If the property in question is ancestorial, then the share of each co-owner would be based on the inheritance law governing their religion. For instance, in the case of Hindus, the Hindu Succession Act, 1956 will come into the picture.
If the property was bought by two people contributing the same amount, then the division of share will also be equal through a partition deed. However, if the ratio of contribution is 70:30, then the division would also be in the same manner.
After a partition deed is executed
So, what happens after a partition deed comes into effect? Once the partition deed is executed, each share in the property becomes an independent entity and gets a new title. Members whose shares have been allocated to other members must also surrender their claim in the shares. The next step should be to complete the property mutation process.
Registration and stamp duty on partition deed
A partition deed requires to be registered at the local sub-registrar’s office to endow it with legal weightage. This is mandatory under Section 17 of the Indian Registration Act, 1908. This also implies that the parties involved will have to pay stamp duty and registration charges while getting the partition deed registered. The stamp duty rate varies from state to state, while the registration charge is 1% of the total or registered property value.
Income tax on partition deed
Since there is no property transfer involved, the beneficiaries are not liable to pay any capital gains tax after the deed is executed.
Partition suit
What if only one of the co-owners want the property to be partitioned? In such a case, a partition suit should be filed in the court of law.
Points to remember
- Ensure that the text of the partition deed is clear. It should mention each aspect of the division including the names of the parties involved, the date on which it is executed, and the share of each co-owner.
- Since the partition deed can be challenged in the court of the law, it is advisable to avoid any ambiguities in the text of the deed.
- Once the deed is ready, read the document thoroughly before proceeding.