Legal FAQ's What is FSI? Is the leave and licence agreement generally signed in multiples of 11 months or 12 months? Is there any stipulation of time? Can premises already encumbered to a bank be leased out to a Company with a high deposit and in case of a default who holds the first lien? And will the Company/Occupant be evicted? Is Business Centre Agreement done for Commercial Premises safe? What is TDR? Is registration of a Leave and Licence mandatory and what are the consequences if the same is not registered? How do I determine the property tax on the rent received as I have given the premises on higher rent to a Company? Are there any guidelines set by the BMC? Society charges us heavy amounts and even deposits if we give our apartment on Leave and Licence basis without payment of past dues which are in litigation? Would occupation by the occupant create more trouble for him and me? The society refuses to give us NOC for leasing the apartment on leave and licence basis without payment of past dues which are in litigation? Would occupation by the occupant create more trouble for him and me? What is the difference between lease and leave and licence agreement? Do I need permission of the Society to keep a Paying Guest and are there any extra society outgoings I need to bear? Is it compulsory to Register Sale Agreements/ Documents of ownership flats: I have a flat which I want to sell and buy a new flat which will be bigger in area. What are my tax implications especially with regard to capital gains? When a flat is gifted to a daughter what are the legal implications regarding: i) Title- and how is this established. ii) Gift tax- is it leviable and if so when? How to appeal for reduction of property tax if you are an individual in a society? I have a flat which I want to sell and buy a new flat which will be bigger in area. What are my tax implications especially with regard to capital gains? Is it safe to give ownership flat for leave and licence? What are the problems if I give for a longer period? Some residential and commercial properties which I own are occupied by people who are not paying rent and also not vacating. I require help in solving such problems. House on rent for 35 years. Rent receipt is in the name of the mother. If the mother is to pass away, will the daughter be asked to continue staying in the house? The landlord is threatening to vacate them after the mother passes away, what can they do to protect themselves? Will they have a good case in Court? The daughter already has a flat in her name. Will it make a difference? If the landlord does not repair or maintain property, staircase, terrace and the tenants want to do, can they and can they deduct rent from the landlord if he does not share. Do we require permission from the landlord for taking separate water connection, tank etc. How can we evict tenants who do not pay or have made changes in their flats? Some people have constructed in our Society, a Jain temple without the permission of AGM.. Then what are we to do? Our building is going to be broken and reconstructed and the owner promises housing for 15 months during which time he will finish construction. In the event that he cannot, what do we do? I have a property in MHADA which I want to develop into a Hospital….What is the process? Does it amount to change of user? What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission? Can such property be sold without the permission of Reserve Bank? Can sale proceeds of such property if and when sold be remitted out of India? Are any conditions required to be fulfilled if repatriation of sale proceeds is desired? What is the procedure for seeking such repatriation? Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift? Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organisations in India? Can foreign citizens of Indian origin acquire commercial properties in India? Can they dispose of such properties? Can sale proceeds of such property be remitted out of India? Can the properties (residential/commercial) be given on rent if not required for immediate use? Can NRIs obtain loans for acquisition of a house/flat for residential purpose from authorised dealers/financial institutions providing housing finance? Can Indian companies grant loans to their NRI staff? Can authorised dealer grant housing loan to non-residents of Indian nationality where he is a principal borrower with his resident close relative as a co-obligant/guarantor or where the land is owned jointly by such NRI borrower with his resident close relative? On buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the genuineness of the builder? How to verify the authenticity of the various documents submitted by the seller of the house, particularly with regard to the possibility that the house has not been sold earlier to a third party? What exactly do we mean by a Free Hold Flat? What are the advantages and disadvantages, if any? Is a POA Revocable? Who is the appropriate authority for knowing the market value of the property? Q. What is meant by the market value of the property and whether Stamp Duty is payable on the market value of the property or on consideration as stated in the agreement? What is the difference between Built-Up Area, Super Built-Up Area and Carpet Area? Is there any way by which I can claim exemption from tax on capital gain? Whether incidental charges like brokerage, registration fees, stamp duty and other charges arising out of sale of house property deductible from profit arising on sale? What are the tax implications of sale of any house property, commercial or residential? Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the credentials of the builder? Is it advisable for the Society to hand over the Management of the Society to an administrator? When does the Registrar of Cooperative Society appoint an administrator ? Who can claim deduction for interest on housing loan ? Is it necessary that the loan should be taken only from housing finance companies ? Can the loan be taken for renovation or repairs of the house ? Can interest be allowed for purchasing an open plot of land ? How much deduction is allowed from the Income Tax in case of a Home Loan? A community friend wants to gift his residential flat in a co-operative housing society which was purchased by his grandfather in 1970 to me. What will be the gift tax and other implications in stamp duty and co-operative housing society? Should the society going in for redevelopment purchase TDR in the name of the developer or society? What are income tax implications of redevelopment? I had a flat purchased in 1984. A reconstructed flat has been received in redevelopment in 2007 and sold in 2009. What is the tax liability? I am interested to know the details of indemnity bond (rules / regulations) that needs to be furnished by the managing committee of a co-operative housing society. The details are needed especially from the perspective of understanding the powers that a managing committee has in case they have not submitted one. It would also help if you can let me know the details of the actions that other members can take in terms of challenging the orders passed by such a committee. Could you also let me know the any details on the redevelopment front? Any documents or links to this information would also help. UTILISATION OF THE SINKING FUND Members of our Society wish to redevelop our society building themselves using TDR. Each of the members is expected to have an additional area equal to the area already occupied by him/her at the cost price when completed. Members can keep the flats for themselves or sell the flat at prevailing price. Is the profit so earned subject to income tax or any other charges? Each of our memberships ranges from five years to 12 years from 1997, the date of registration of the society. The building was completed in 1994 and occupied since then. Redevelopment would be funded partially by members who can afford it and partially from loans etc. My son was working in a reputed software company and now has been laid off. He has housing and car loans from banks. Now due to the loss of his job, it is not possible for him to pay EMIs. I have taken immediate action by sale of my own flat, I could arrange part payment of bank loans thus to reduce EMIs. Now, my tax related queries are: - Should I repay his housing loan directly to bank to avoid any tax complication? I am a retired senior citizen and have not had taxable income since the last two years. - Alternately, I pay the full amount of sale to my son for him to repay the housing loan. Kindly advise, what shall be the best method to avoid tax implications, either to me or to my son? When I purchased my flat I was the sole purchaser as nobody from my family could be around. In this condition is it necessary to make a will to transfer my property to my brother after me? Or is submitting a nomination for a cooperative housing society enough to ensure that the property is transferred in his name? Our society consists of three buildings and 98 members. The age of our society is five years only. Recently it has been decided to replaster and repair the three buildings and extra funds are being collected for the same. Recently during the last AGM it had been decided by the committee members that the dish antennae kept at the top of the buildings (10-15% have dish antennas) have to removed and it should not be kept at the terrace after repairing; also it will lead to leakage. Due to the unavailability of a signal near our flats we are forced to keep the antennae on the terrace. Does the society have a right to pass such order? Another resolution passed by the society is that plants kept at the windows of the flats also have to be removed during repair work and even after completion of repair they should not be kept at the flats. Instead, they should be kept in the garden. Can the society pass such an order? As per model bye-law no. 38 (e) (vii) fees at the time of transfer of a flat is Rs 500 My society managing committee has proposed the following resolution in the forthcoming special general body meeting, " To approve payment at the time of transfer of the flat, by an outgoing member @2% of the agreement value or market value whichever is higher. I feel this is illegal and hence need your advice on the same. I was staying in Vasai in a cooperative housing society in a flat on ownership basis and was paying Rs.1000/ as monthly maintenance charges. I have shifted to Andheri to government quarters and have retained the flat, which is now locked. The society demands full maintenance charges even though I do not stay there. Are they right in demanding full maintenance charges? What is my defence or right? Should I pay full maintenance charges or only 10% of the service charges? Please let me know. We are planning to keep fixed deposits in the bank in the name of our society towards the sinking fund, repair fund. Kindly advise whether such deposits will attract TDS and then at what rate will the same be deducted. Social responsibility Commissioner of Cooperative Department & Registrar of Cooperative Housing Societies (Maharashtra) Dr Krishna Lavekar, IAS, talks to Tapan Banerjee about critical issues Our society structures have developed severe cracks and openings in beams and columns in many flats, and also, many members are complaining of water seepage and plaster peeling from walls as well as ceiling. After doing a structural survey by a licensed structural engineer, the estimate for the urgent recommended work comes to Rs.15 L. What guidance I seek from you is, which are the repairs that 'Society' has to take action on, and which repairs should be done individually by the members themselves, and under which co-operative society rules/acts? Ihave mutually exchanged my flat with the other member having same area (So as to combine my flat with my son's Flat) as per society byelaws 41,42 &65 Society made the transfer entries in the share Certificates. Do I have to pay stamp duty and register this deed or the exchange on the Society books and share Certificate is sufficient? If the building completion certificate, occupation certificate, and approved building plan are required for getting the conveyance deed in favour of the society. Ours is a big housing society consisting of 256 units. The society is formed and was registered in November 2003. All the units are sold and occupied. The developer has given a few plots to a sub-developer for development and constructing housing units and selling. In their agreement, one of the conditions is that on developing all plots, the sub-developer will approach the developer for handing over the conveyance. Now the position is such that only one plot is yet to be developed by the sub-developer. The sub-developer is not ready to execute conveyance for our society because all plots are not developed. In fact, there is no connection of the undeveloped plot and our housing society. Six years have already passed and there is no sign of developing the vacant plot. I wish to gift my flat which is in a cooperative housing society, to my cousin. Would there be any gift tax or income-tax payable, being a gift to a relative? I have held the flat for many years. What about stamp duty? Is there any concession? If the gift does not work out I can make out a will in favour of my cousin. We wish to enter into a leave and licence agreement for a period of two years with a possibility for renewal for one more year. If we put a renewable clause, will it be necessary to enter into a new agreement after two years? It is difficult to go through the process of registration again, so can the same agreement continue? Transfer of a share certificate is not a relevant aspect for the purpose of transfer under the Income Tax Act, 1961 In a co-operative housing society, can the loan be obtained for purchasing a flat without permission of the society? Are loan processing charges allowable as deduction from income from house property under income tax? Can a society deal with admission of a new flat purchaser in the annual general body meeting only, which will take place after many months? Would a long delay in transfer by the society have adverse implications under the Income tax Act? Can a partnership, company purchase a residential flat and under income tax in whose hands it will stand? I have purchased a re-sold property. The procedure for this transaction is as follows: First the builder made an Agreement between himself and Mr Patel. They registered the agreement. But before possession, Mr Patel sold that flat to Mr Naik after receiving the builder's NOC. Mr Naik also registered the agreement. However, due to some reason he too, sold the flat to Mr Sathe. Up till this procedure the builder had not given any possession letter because of some pending work. Now, does Mr Sathe require any NOC letter from the builder? I have booked a 2BHK flat and the builder has mentioned other charges which are fine with me but if the builder increases these other charges demand for the excess, then what we will I do? Is there any law against the builder? What precaution can we take while booking or signing the buyer seller agreement? Please advise. My apartment construction has been completed and it is up for possession. Recently all flat owners have received a legal notice from a few persons stating that the land has been encroached. The builder has clarified and is insisting this has been a false case without any basis and builder had filed a complaint with district RDO (Revenue Divisional Office) and the RDO decided in favour of the builder. We have received the legal notice after the RDO decision. Since the flats are ready for possession, should we take a written letter from the builder that the flats are free from land encroachment so that we are safe from all future legal hassles? Kindly advise. I wish to know about Free Hold plots. Can we convert agriculture land into residential plots? If yes, then, how? I booked a flat in March 2008. The agreement was executed in February 2010. In the brochure as well as in agreement, the builder promised to give a club house for which a proportional amount was paid with all paid installments, but the builder has not commenced even foundation work for the club. He has, though, completed construction of the flat and building in which the flat is located but has not obtained the Completion Certificate. I have yet to pay the final installment i.e. 5% of cost of the flat which as per the terms of agreement, is to be paid after taking possession. Will it be legally correct to take possession in absence of Completion Certificate? What is FSI? Floor Space Index(FSI) means the quotient of the ratio of the combined gross floor area of all floors excepting areas specifically exempted under these Regulations to the total area of the plot. [Back to Top] Is the leave and licence agreement generally signed in multiples of 11 months or 12 months? Is there any stipulation of time? Formerly leave and licence agreements used to be signed in multiples of 11 months or 12 months. After The Maharashtra Rent Control Act,1999 came into force from 1.3.2000 there is no stipulation as to whether leave and licence agreement should be in multiples of 11 or 12 months, and there is no stipulation as to total time period.However Leave and licence agreement generally does not exceed three years. But the new rule effective from 7th May 2005 states that you can do a leave and license agreement now for a period upto 5 years and in multiples of 12 months each. [Back to Top] Can premises already encumbered to a bank be leased out to a Company with a high deposit and in case of a default who holds the first lien? And will the Company/Occupant be evicted? Yes premises already encumbered to a bank can be leased out to a Company with a high deposit. However you may require the No-Objection of the bank. If the deposit monies are with you and in case if you default on payment to the bank,obviously you will continue to hold the deposit money. The Co./occupant can be evicted only if there is a provision to that effect in the lease Agreement. [Back to Top] Is Business Centre Agreement done for Commercial Premises safe? If the Business Centre Agreement is genuinely a Business Centre Agreement then it is safe to use commercial premises as such business center, since you shall be in physical control of the premises [Back to Top] What is TDR? Rule 34 of the Development Control Regulations for Greater Bombay,1991 defines TDR which stands for Transferable Development Rights as under: ‘In certain circumstances, the development potential of a plot of land may be separated from the land itself and may be made available to the owner of the land in the form of Transferable Development Rights. These rights may be made available and be subject to the Regulations in Appendix VII hereto. Appendix VII lays down the rules for the grant of Transferable Development Rights to owners/developers and conditions for grant of such rights: 1. The owner (or lessee) of a plot of land which is reserved for a public purpose in the development plan and for additional amenities deemed to be reservations provided in accordance with these Regulations excepting under certain conditions shall be eligible for the award of TDR in the form of Floor Space Index(FSI) to the extent and on the following conditions set out below. Such award will entitle the owner of the land to FSI in the form of a Development Rights Certificate (DRC) which he may use himself or transfer to any other person. 2. Subject to Reg.1 where a plot of land is reserved for any purpose specified in S.22 of Maharashtra Regional and Town Planning Act,1966 the owner would be eligible for DR’s to the extent stipulated in Rules 5 & 6 in this Appendix after the said land is surrendered free of cost or after completion of development. 3.TDR’s will be available only for prospective development of reservations. 4.DRC’s will be issued by the Commissioner himself giving details of FSI credit. 5.The built up area for the purpose of FSI shall be equal to the gross area of the reserved plot to be surrendered. 6.When the owner or lessee also develops or constructs the amenity on the surrendered plot at his cost, he may be granted a further DR in the form of FSI equal to the area of the construction/ development done by him. [Back to Top] Is registration of a Leave and Licence mandatory and what are the consequences if the same is not registered? As per Section 55 of the Maharashtra Rent Control Act,1999 registration of Leave and Licence Agreement is compulsory and it is the responsibility of the landlord to ensure registration. If the same is not registered, the landlord would be prosecuted and on conviction he’s subject to upto three months imprisonment or be subject to fine not exceeding Rs.5000/- or with both. Further in the absence of a Registered Agreement, the contention of the tenant, about the terms and conditions on which the premises have been given to him by the landlord shall prevail unless otherwise proved. [Back to Top] How do I determine the property tax on the rent received as I have given the premises on higher rent to a Company? Are there any guidelines set by the BMC? The calculation of property tax on rent cannot be generalized and depends on various factors, but however if the premises are rented out to banks, companies, multi-nationals, etc. who are exempted from the provisions of the Maharashtra Rent Control Act,1999 by virtue of Section 3(1) (B) of the Act then the rates of property taxes could be as high as 60% or so. If the premises are rented out to others, who are protected under the Rent Act, the Mumbai Municipal Corporation cannot charge taxes on the actual rent and have to base their taxes on Standard rent defined under the Act, which is, in most cases lower than the actual market rent. [Back to Top] Society charges us heavy amounts and even deposits if we give our apartment on Leave and Licence basis without payment of past dues which are in litigation? Would occupation by the occupant create more trouble for him and me? Although there are no fixed rules on the subject. However the society must be reasonable in all matters and if it is charging an exorbitant amount you could approach the Registrar of Co-operative Societies. [Back to Top] The society refuses to give us NOC for leasing the apartment on leave and licence basis without payment of past dues which are in litigation? Would occupation by the occupant create more trouble for him and me? If the society is not giving you its No-objection and you still give your flat out on leave and licence, the society could file a suit against you and the licencee and take legal action. [Back to Top] What is the difference between lease and leave and licence agreement? Lease is defined under Section 105 of The Transfer of Property Act,1882 and a lease of immoveable property is a transfer of a right to enjoy such property for a certain time or in perpetuity on consideration to be rendered periodically or on specified occasions, while a licence is defined in Section 52 of the Indian Easement Act,1882 and it does not create any interest in the premises in favour of the licensee excepting a mere right to use and occupy the premises for a limited duration. Both documents have now to be registered. A lease deed is required to be stamped and registered. However the stamp duty payable on lease is more than on Leave and Licence for a period upto three years. For a period exceeding three years the stamp duty is same for both agreements. The implications of entering into a lease agreement would be: i) That stamp duty would have to be paid ii) That the document would have to be registered iii) That Municipal taxes may go up iv) Of course, Income-tax would have to be paid on your income; and v) The question of Wealth-tax would have to be considered. One property is exempt from Wealth-tax. However, if you have any other property, this implication would have to be considered. [Back to Top] Do I need permission of the Society to keep a Paying Guest and are there any extra society outgoings I need to bear? Yes, you need permission of the Society for keeping a Paying Guest. It depends on the Society bye-laws and rules. Some Societies keep asking for extra outgoings by way of Non-Occupancy charges. [Back to Top] Is it compulsory to Register Sale Agreements/ Documents of ownership flats: a) Purchase from builders b) Resale flats -Society not registered c) Resale in a Registered Co-op Society (Conveyance in favour of Society completed) d) Resale in a Registered Co-op Society (Conveyance not completed through administration by Society.) Answer (i) Registration of agreement for sale/documents of ownership flats when ownership flats are purchased from builders, one should register such agreements with the Sub-Registrar. (ii) In case of resale of flats in a society which is not registered, the registration would be required. (iii) In case of resale of flats in a registered Co-operative Society no registration is compulsory as per section 41 of the Maharashtra Co-operative Societies Act, 1960. However, some societies do insist that such documents be registered. (iv) It does not really matter whether conveyance has been granted to the society or not since it is only a change of membership which takes place in a society. Thus the answer to (c) above is relevant even where no conveyance has been granted in favour of a society. (v) The Registrar of Co-operative Societies has issued some time back a circular to societies whereby he has stated that all documents for transfer of flats be registered. However, under section 41 of the Maharashtra Co-operative Societies Act registration is not compulsory in case of sale of flats in societies but in view of the aforesaid circular some societies do insist on registration. (vi) The Bombay High Court has held that transfer of shares in a co-operative society is in fact transfer of immovable property for the purpose of stamp duty. However, section 41 of the Maharashtra Co-operative Societies Act is still valid and two issues involved here are different. Section 41 deals specifically with regard to the registration issue as stated above. [Back to Top] I have a flat which I want to sell and buy a new flat which will be bigger in area. What are my tax implications especially with regard to capital gains? On the proposed sale of your flat you may purchase another flat within two years of the date of sale of the original flat. If you have invested the entire amount of capital gain irrespective of your area of the flat, you would not have to pay any capital gains tax. [Back to Top] When a flat is gifted to a daughter what are the legal implications regarding: i) Title- and how is this established. ii) Gift tax- is it leviable and if so when? If one has gifted a flat to his daughter one should have the gift deed drawn out which should be witnessed by two persons. In case of both the donor and the donee it is preferable to register the said gift deed even if the flat is in a co-operative society. Stamp duty would have to be paid on the gift deed which would be the same as in case of the sale of a flat. However, there is no gift tax applicable. The gift deed would be the title document indicating the gift to the daughter along with the share certificate if it is in a co-operative society. [Back to Top] How to appeal for reduction of property tax if you are an individual in a society? If property tax has been levied which you feel ought to be reduced, you should write to the society stating your reasons for the same. The society would take up the matter with the Municipal Authorities and have the same reduced if the same is justified. [Back to Top] I have a flat which I want to sell and buy a new flat which will be bigger in area. What are my tax implications especially with regard to capital gains? On the proposed sale of your flat you may purchase another flat within two years of the date of sale of the original flat. If you have invested the entire amount of capital gain irrespective of your area of the flat, you would not have to pay any capital gains tax. [Back to Top] Is it safe to give ownership flat for leave and licence? What are the problems if I give for a longer period? Yes, it is safe to give ownership flat for leave and licence provided an agreement has been entered into to that effect and the same leave and licence agreement has been registered with the Competent Authority under the Maharashtra Rent Control Act,1999. [Back to Top] Some residential and commercial properties which I own are occupied by people who are not paying rent and also not vacating. I require help in solving such problems. In those residential and commercial properties owned by you and occupied by people who are not paying rent you may serve a notice in writing to the tenants for demand of the standard rent in the manner provided in Section 106 of the Transfer of Property Act,1882(IV of 1882) and after expiry of 90 days and the rent has yet not been submitted by the tenants you may then file a suit for eviction of the tenants under the Maharashtra Rent Control Act,1999 and recover possession of the tenanted premises under Section 16 of the said Act. [Back to Top] House on rent for 35 years. Rent receipt is in the name of the mother. If the mother is to pass away, will the daughter be asked to continue staying in the house? The landlord is threatening to vacate them after the mother passes away, what can they do to protect themselves? Will they have a good case in Court? The daughter already has a flat in her name. Will it make a difference? After the death of your mother, the landlord would be required to transfer the rent receipt to the family members staying with her at the time of her death. So if your sister is staying with your mother at the time of her death, she can have the rent receipt transferred in her name. However if your sister has another flat in her name the landlord would have a good case for eviction against your sister if he requires the said flat for his own personal use. [Back to Top] If the landlord does not repair or maintain property, staircase, terrace and the tenants want to do, can they and can they deduct rent from the landlord if he does not share. If the landlord does not repair or maintain the property, the tenant could after giving sufficient notice to the landlord do so carry out repairs which are necessary and deduct the cost thereof from the rent. [Back to Top] Do we require permission from the landlord for taking separate water connection, tank etc. Yes, you do require permission from the landlord for taking separate water connection, tank etc. [Back to Top] How can we evict tenants who do not pay or have made changes in their flats? You can evict the tenant who is not paying rent or who has made permanent alterations/additions in the premises by giving him notices to this effect as required under law and proceed against the tenant in a Court to evict him. [Back to Top] Some people have constructed in our Society, a Jain temple without the permission of AGM.. Then what are we to do? If any unauthorised construction has taken place at any place you could approach the local authority i.e. the municipal corporation in the relevant case who would then take proper action in the matter. [Back to Top] Our building is going to be broken and reconstructed and the owner promises housing for 15 months during which time he will finish construction. In the event that he cannot, what do we do? If any unauthorised construction has taken place at any place you could approach the local authority i.e. the municipal corporation in the relevant case who would then take proper action in the matter. [Back to Top] I have a property in MHADA which I want to develop into a Hospital….What is the process? Does it amount to change of user? Whether you can convert your property into a hospital would depend on the terms and conditions of the lease or allotment from MHADA. Normally, conversion of a residential property into a hospital would be possible as this is an essential service. However the approval of MHADA would be required and so would that of the BMC. This would amount to change of user because it is for a hospital. This could be permitted. [Back to Top] What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission? They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid. [Back to Top] Can such property be sold without the permission of Reserve Bank? Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts. [Back to Top] Can sale proceeds of such property if and when sold be remitted out of India? In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property. [Back to Top] Are any conditions required to be fulfilled if repatriation of sale proceeds is desired? Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later. [Back to Top] What is the procedure for seeking such repatriation? Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of Reserve Bank at Mumbai within 90 days of the sale of the property. [Back to Top] Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift? Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws. [Back to Top] Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organisations in India? Yes. General permission has been granted by Reserve Bank to non-resident persons (foreign citizens) of Indian origin to transfer by way of gift immovable property held by them in India to relatives and charitable trusts/organisations subject to the condition that the provisions of any other law, including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly complied with. [Back to Top] Can foreign citizens of Indian origin acquire commercial properties in India? Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers' NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration. [Back to Top] Can they dispose of such properties? Yes. [Back to Top] Can sale proceeds of such property be remitted out of India? Yes. Repatriation of original investment in respect of properties purchased by foreign citizens of Indian origin on or after 26th May 1993 will be allowed to be remitted up to the consideration amount originally remitted from abroad provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later. Applications for the purpose are required to be made to the Central Office of Reserve Bank within 90 days of the sale of property in form IPI 8. [Back to Top] Can the properties (residential/commercial) be given on rent if not required for immediate use? Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation. [Back to Top] Can NRIs obtain loans for acquisition of a house/flat for residential purpose from authorised dealers/financial institutions providing housing finance? Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorised dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors‘ NRE/FCNR/NRO accounts. [Back to Top] Can Indian companies grant loans to their NRI staff? Reserve Bank permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian passports subject to certain conditions. [Back to Top] Can authorised dealer grant housing loan to non-residents of Indian nationality where he is a principal borrower with his resident close relative as a co-obligant/guarantor or where the land is owned jointly by such NRI borrower with his resident close relative? Yes. However, in such cases the payment of margin money and repayment of the loan instalments should be made by the NRI borrower. [Back to Top] On buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the genuineness of the builder? While buying a flat from a builder in a building under construction, check the following: • The builder has approval on the building plan along with the number of floors • and approval on the floor, on which your flat is situated. • Verify the documents for the ownership of the construction site. In case, the • builder is not the owner verify the written agreement with the landlord, and • check the title of the land ownership with the help of an advocate. • Check the building bylaws as applicable in that area, and ensure that the • builder is doing the construction without any violation of front setback, side • setbacks, height etc. • Check specifications given in the agreement to sell off the Sale Brochure. • Check the reputation of the builder. • The builder has obtained Urban Land Ceiling NOC (if applicable) and NOC from • Water & Electricity Authorities. [Back to Top] How to verify the authenticity of the various documents submitted by the seller of the house, particularly with regard to the possibility that the house has not been sold earlier to a third party? Regarding the authenticity of documents, you have to take the help of an advocate for verifications. [Back to Top] What exactly do we mean by a Free Hold Flat? What are the advantages and disadvantages, if any? A freehold property (plot or a flat) is one where there is a whole and sole owner(s) ownership is full and unconditional (within the provisions of the laws of the land) and there is not lessor/lessee involved. [Back to Top] Is a POA Revocable? Yes, POA can be either revocable or irrevocable, depending on what sort of a POA one has made. [Back to Top] Who is the appropriate authority for knowing the market value of the property? The Sub-Registrar of the area in whose jurisdiction the property is located is the appropriate authority for knowing the market value of the property. [Back to Top] Q. What is meant by the market value of the property and whether Stamp Duty is payable on the market value of the property or on consideration as stated in the agreement? The market value means the price at which a property could be bought in the open market on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the ready reckoner(a government published guide on property rates in all areas) value which ever is higher. [Back to Top] What is the difference between Built-Up Area, Super Built-Up Area and Carpet Area? Carpet Area: This is the area of the apartment/building that does not include the area of the walls. Built-Up Area: This is the area of the apartment/building including the area of the walls. Super Built-Up Area: This includes the Built-Up Area along with the area under common spaces such as the lobby, lifts, stairs etc. This term is therefore only applicable for multi-dwelling units. [Back to Top] Is there any way by which I can claim exemption from tax on capital gain? The Income Tax Act has made provision under sections 54, whereby you can claim exemption from tax on capital gains. Section 54 - Purchase or construct another residential house worth the amount of capital gains. Section 54 protects capital gains arising out of sale (or transfer) of a residential house whether self-occupied or not, provided the assessee has purchased within 1 year before or 2 years after the date of sale of the original asset or has constructed within 3 years after that date, a residential house. The only condition is that the newly-acquired property should not be sold within 3 years from the date of its purchase or construction. If this condition is not satisfied, the cost of the new asset is to be reduced by the amount of long-term capital gains exempted from tax on the original asset and the difference between its sale price and the reduced cost will be chargeable as short-term capital gain earned during the year in which the new asset is sold. This condition is unfair. [Back to Top] Whether incidental charges like brokerage, registration fees, stamp duty and other charges arising out of sale of house property deductible from profit arising on sale? These expenses are allowable expenses from the full value of consideration of the sale of house property. [Back to Top] What are the tax implications of sale of any house property, commercial or residential? You are liable to pay Tax on profit arising from sale of a house property under the head Capital Gain. [Back to Top] Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the credentials of the builder? When you are in the process of buying a flat from a builder in a building under construction, you need to check for the following - approved plan of the building along with the number of floors. ensure that the floor that you are buying is approved. check if the land on which the builder is building is his or he has undertaken an agreement with a landlord, if so, check the title of the land ownership with the help of an advocate. check the building byelaws as applicable in that area and ensure that the builder is building without any violation of front setback, side setbacks, height, etc. check specifications given in the agreement to sell of the sale brochure. Is he providing the same actually on the ground or not? check the reputation of the builder. ensure that Urban Land Ceiling - No Objection Certificate (NOC) (if applicable) has been obtained or not. NOC from water and electricity authorities also have to be obtained. NOC from lift authorities. [Back to Top] Is it advisable for the Society to hand over the Management of the Society to an administrator? When does the Registrar of Cooperative Society appoint an administrator ? As far as possible disputes within the society should be solved amongst the members. It is not advisable to hand over the management of the society to an administrator. Even in cases when none of the members are interested in doing the administrative work it is advisable that the society employ a paid employee. The major decisions should be taken by the members themselves. When the management of the Society is not functioning as per the provisions of the Maharashtra Cooperative . Societies Act, 1960, Maharashtra Co-operative Societies Rules, 1961 and the Bye-Laws of the Societies , then in such cases the Registrar has the discretion to appoint an administrator to carry out the management of the Society. Normally the administrator is appointed for a period , not exceeding six months. The remuneration payable to the administrator shall be decided by the Registrar and shall be paid from the funds of the society. [Back to Top] Who can claim deduction for interest on housing loan ? A person may claim deduction from income (under the head “house property”) for interest payable in India on housing loan, if such loan is taken for acquiring, constructing, reconstructing, repairing or renovating a property. However, if the property is used for business carried on by the assessee, he may claim deduction for such interest from income under the head “business or profession”. In both cases, property would include residential as well as commercial property. [Back to Top] Is it necessary that the loan should be taken only from housing finance companies ? No, it is not necessary that the loan should be taken only from housing finance companies. One may take loan from any company or person, even from family members. [Back to Top] Can the loan be taken for renovation or repairs of the house ? Can interest be allowed for purchasing an open plot of land ? Loan can be taken for renovation or repairs of the property. But if taken for purchasing an open plot of land, interest may be allowed only if construction of property is started on it, such interest to be deducted after the construction is completed. But if open plot is purchased in the name of an existing business, interest may be allowed under the head “business income” in the respective year even if construction is not commenced. [Back to Top] How much deduction is allowed from the Income Tax in case of a Home Loan? If the property is either let out or used for assessee’s own business, then the entire amount of interest is deductible. But if the property is used by the assessee for his own residence or for the residence of his family, then the deduction of interest is subject to a ceiling limit. This limit was Rs. 10,000/- for assessment years 1995-96 and 1996-97 and Rs. 15,000/- for A.Y. 19997-98 and 1998-99. From A.Y. 1999-2000, the limit has been raised to Rs. 30,000/-. These new limits apply for not only new loans but also the existing loans taken earlier and new as well as old properties. The ceiling limit for deduction of interest is raised to Rs. 75,000/- by the Finance Act, 1999, with effect from 1st April 2000 applicable to the current financial year (A.Y. 2000-2001). But this new limit is applicable in only such cases “where the property is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed before the 1st day of April 2001”. Another point to remember is that while computing income under the head “house property”, interest is deducted only after completion of construction of the Property. As regards the interest pertaining to earlier period i.e. for the period of construction, it is allowed in five years commencing from the year in which construction of the property is completed. However, in case of self occupied property, this interest is also subject to the ceiling limit as mentioned above. [Back to Top] A community friend wants to gift his residential flat in a co-operative housing society which was purchased by his grandfather in 1970 to me. What will be the gift tax and other implications in stamp duty and co-operative housing society? The Gift Tax Act has been abolished since October 1998. Section 56(2) (vi) of the Income Tax Act, 1961 is the section charging inter alia the gifts received by individuals and HUFs as income taxable in the hands of such recipients. However, in the context of section 56(2)(vi), a view is taken that since the term used in the said section is 'sum of money', such a term would not include a gift in kind unless the kind is equivalent to sum of money. Therefore the flat received as a gift should not be taxable. As far as stamp duty is concerned only the gifts to specified relatives are liable for concessional stamp duty. In other gifts, the stamp duty at regular rates on the market value of the property would be levied. As the gift is of an immovable property, the gift deed will also be liable to registration under the provisions of Registration Act, 1908. As far as the society is concerned, the gift should not attract transfer premium, as there is no profit made by the transferor. [Back to Top] Should the society going in for redevelopment purchase TDR in the name of the developer or society? What are income tax implications of redevelopment? I had a flat purchased in 1984. A reconstructed flat has been received in redevelopment in 2007 and sold in 2009. What is the tax liability? If the TDR is purchased in the name of the society it is always better as it acts as another safety buffer for the society. However, the society should be cautious about the stamp duty implications. Specific income tax implications would be based on the facts of the case and on the manner in which the transaction is structured and the documents drafted. In general, one can take a view that the redevelopment should not attract income tax in respect of the compensation and consideration receivable from the developer. Compensation is not income and when the consideration is received for sale of an asset having no cost of acquisition, tax would not arise. The facts of the case and applicable legal provisions should be brought out very clearly in the development agreement so that the tax liability is Zero can be proved to the satisfaction of the authorities. In redevelopment, the society is the owner of the land and building before commencement of redevelopment and continues to be so after the redevelopment. On such analogy, recently the Hon'ble Mumbai Tribunal has ruled that there is no income tax on such development agreement in the case of the Sailaja Co-operative Housing Society Ltd. whose case was represented by this writer. When a newly constructed flat is received in place of the old one, for the purpose of computation of income tax liability, the period of holding should be computed from the date of original acquisition and therefore the same would commence from 1984 in your case. The cost of improvement should be considered from the date of improvement. [Back to Top] I am interested to know the details of indemnity bond (rules / regulations) that needs to be furnished by the managing committee of a co-operative housing society. The details are needed especially from the perspective of understanding the powers that a managing committee has in case they have not submitted one. It would also help if you can let me know the details of the actions that other members can take in terms of challenging the orders passed by such a committee. Could you also let me know the any details on the redevelopment front? Any documents or links to this information would also help. Under section 73(1AB) of the Maharashtra Cooperative Societies Act, 1960, it is provided that the members of the committee shall be jointly and severally responsible for all the decisions taken by the committee during its term relating to the business of the society and that the members of the committee shall jointly and severally be responsible for all the acts and omissions detrimental to the interest of the society. It is further provided that all committee members shall execute a bond to that effect within 15 days of assuming the office. The said bond is to be executed in form no. M-20 is prescribed under Rule 58A of the Maharashtra Co-operative Societies Rules, 1961. Before fixing any responsibility on members of the committee the Registrar shall inspect the record of the society and decide as to whether the losses incurred by the society were on account of acts or omissions on the part of members of the committee or on account of any natural calamities, accident or any circumstances beyond the control of such members,. Further any member of the committee who does not agree with any of the resolution or decision of the committee may express his dissenting opinion and such member shall not be held responsible for the decision. Also any member who was not present in the meeting in which the business of the society is transacted and who has not subsequently confirmed the proceedings of the meeting shall not be responsible for any of the business transacted in that meeting. The member who fails to execute such a bond within the specified period shall be deemed to have vacated his office as a member of the committee. In such an event the decisions taken by a committee whose members have not filed the said bonds can be challenged. However this would depend upon certain factors such as how many committee members have not filed the bonds, etc. Further section 77 of the Act states that no act of a committee done in good faith in pursuance of the business of the society shall be deemed to be invalid by reason only of some defect subsequently discovered in the constitution of the committee. The Registrar shall decide whether any act was done in good faith in pursuance of the business of the society and his decision thereon shall be final. [Back to Top] UTILISATION OF THE SINKING FUND Societies can fall back upon the sinking fund for making structural alterations to strengthen the building For structural repairs : The sinking fund is meant for reconstruction of the building. However, if it becomes necessary for a cooperative housing society to make any structural additions to and/ or alterations in the building which would strengthen it and if it has no funds to carry such additions and/or alterations, if can fall back upon its Sinking Fund. Procedure for withdrawing from the sinking fund: In case of withdrawal from the sinking fund, either for structural repairs or for reconstruction of the building, prior permission of the Registering Authority is necessary. A co-operative housing society which has no funds or is not able to raise the funds required for carrying out the structural repairs should follow the following procedure for withdrawing an amount from the sinking fund or for creating a charge on the sinking fund investment. An appointment of an Architect should be made at a general body meeting on such terms and conditions as are suggested by it for inspection of the building and bringing out the nature of the structural repairs necessary. After entering into a contract with the Architect subject to the items and conditions approved by the general body meeting, the Architect should be called upon to prepare plans and estimates with specifications of the structural repairs required to be carried out. On getting the report from the Architect about repairs necessary, with plans, estimates and specifications, the managing committee should invite tenders for the work in consultation with the Architect, examine the tenders received and prepare its own report on the tenders received and make its recommendations as to the tender which, in its opinion may be accepted. The plans, estimates with specifications, the tenders received and the committee's report thereon should be placed before the general body meeting called for considering the above documents and taking decision thereon. The general body meeting should also authorise the committee to make an application to the Registering Authority for grant of permission for drawing the required amount from the Sinking Fund/creating charge on the Sinking Fund investment to the extent required. The committee should enter into a contract with the Contractor, whose tender is accepted by the general body meeting, on terms and conditions set out by the general body meeting. The Registering Authority should be requested to grant necessary permission to withdraw the required amount from the sinking fund/ create charge on sinking fund investment. SOURCE: PRACTICAL GUIDE FOR SINKING FUND UTILISATION, INVESTMENT AND WITHDRAWAL BY MAHARASHTRA COOPERATIVE SOCIETIES WELFARE ASSOCIATION [Back to Top] Members of our Society wish to redevelop our society building themselves using TDR. Each of the members is expected to have an additional area equal to the area already occupied by him/her at the cost price when completed. Members can keep the flats for themselves or sell the flat at prevailing price. Is the profit so earned subject to income tax or any other charges? Each of our memberships ranges from five years to 12 years from 1997, the date of registration of the society. The building was completed in 1994 and occupied since then. Redevelopment would be funded partially by members who can afford it and partially from loans etc. Redevelopment of its property when undertaken by society itself or members themselves, whether from society funds, whether from specific contributions by members, whether from borrowed funds by the society or its members, or any combinations thereof would not give rise to any taxable income under the Income Tax Act, 1961. Cases of self-redevelopment by the society or its members would be covered by the concept of mutuality which in a nutshell means that one cannot trade with one's own self and therefore there is no taxable income earned in the process. Raising of funds from outside is not a transaction in between the members or between the society and its members but it is not a transaction in which society or its members are earning income. On the contrary it is a transaction which would give rise to expenditure, deductibility whereof would depend upon whether the same is incurred to earn taxable income or not. Sale of flats by members at the time before, during or after redevelopment would definitely give rise to capital gains depending upon their respective holding periods in their individual cases. Even in such self developments, issues would have to be sorted out with reference to service tax, VAT and stamp duty applicable on the entry of works contracts. TDS requirements would have to be complied. [Back to Top] My son was working in a reputed software company and now has been laid off. He has housing and car loans from banks. Now due to the loss of his job, it is not possible for him to pay EMIs. I have taken immediate action by sale of my own flat, I could arrange part payment of bank loans thus to reduce EMIs. Now, my tax related queries are: - Should I repay his housing loan directly to bank to avoid any tax complication? I am a retired senior citizen and have not had taxable income since the last two years. - Alternately, I pay the full amount of sale to my son for him to repay the housing loan. Kindly advise, what shall be the best method to avoid tax implications, either to me or to my son? Although India stood very strongly in the face of global economic meltdown and has shown very early signs of recovery, the fact remains that the meltdown has affected many to a great extent and the employees having loan liability but failing in their expectations of job continuation, have suffered very badly and yours is an example of such a sad story. In the context of tax implications of repayment of the housing loan and interest thereon, the benefits of repayment would be available to the person who availed such loan and not to the person who may pay such a loan. Whether you give finance to your son and he repays the same or whether you repay his loan directly, in either case, either you are advancing the money as a loan to him or you are gifting the money to him, which will not give rise to taxability in either of the cases. [Back to Top] When I purchased my flat I was the sole purchaser as nobody from my family could be around. In this condition is it necessary to make a will to transfer my property to my brother after me? Or is submitting a nomination for a cooperative housing society enough to ensure that the property is transferred in his name? You should definitely make a will to ensure that the flat devolves upon your brother after your demise and he becomes the owner thereof. If you do not make a will, all your next-of-kin ownership of the flat as per the law of succession applicable to you. However, if your brother is your only next-of-kin, then even if you don't make a will the flat would belong to your brother. Will means the legal declaration of the intention of the person (testator) with respect to his property which he desires to be carried into effect after his death. By making a will the property belonging to the testator passes on to such persons as is the desire of the testator. This is however subject to personal laws applicable to the testator. On the other hand by making a nomination in favour of your brother although the flat may get transferred in the name of your brother after your demise, but your brother would act only as a trustee of the flat. However the ownership of the flat will not pass on to your brother unless of course he is your only next-of-kin or there is a valid will in favour of your brother bequeathing the flat to him. In any event you should also make a nomination in favour of your brother in respect of the flat as a nomination is a quick and easy way to have the flat transferred in the name of the nominee, in the records of the society. [Back to Top] Our society consists of three buildings and 98 members. The age of our society is five years only. Recently it has been decided to replaster and repair the three buildings and extra funds are being collected for the same. Recently during the last AGM it had been decided by the committee members that the dish antennae kept at the top of the buildings (10-15% have dish antennas) have to removed and it should not be kept at the terrace after repairing; also it will lead to leakage. Due to the unavailability of a signal near our flats we are forced to keep the antennae on the terrace. Does the society have a right to pass such order? Another resolution passed by the society is that plants kept at the windows of the flats also have to be removed during repair work and even after completion of repair they should not be kept at the flats. Instead, they should be kept in the garden. Can the society pass such an order? The terrace is a common open space which belongs to the society and the society has the discretion to allow the use of the terrace as it may deem fit within the framework of the Act, rules and bye-laws. In your case the reason for the society not allowing the dish antennae seems to be that fixing of the antennae is likely to cause damage to the walls or other parts of the terrace and hence cause rain water leakage to the floor below. The society has a reasonable point of view since if it were to allow 10 to 15 antennae, it is likely that in future other members may also seek similar permission and there could be many more antennae on the terrace which in turn could be a cause of leakage. I appreciate that in today's times dish antennae are a very common requirement. After considering all the above facts, I feel that although the society is justified in not allowing unlimited number of antennae to be fixed on the terrace, but as an alternative the society should fix one or more common dish antennae and the members who require dish antenna connections could take the connection from the common dish antenna. With regard to your second query, I presume you are referring to the ledge outside the windows on which the plants are placed. I do not know the exact concerns of the society, but if the society has safety concerns that the plants and the pots holding them may fall off due to the wind or otherwise accidentally or the watering of the plants may cause dripping of water or leakage down below, then such concerns of the society are justified. [Back to Top] As per model bye-law no. 38 (e) (vii) fees at the time of transfer of a flat is Rs 500 My society managing committee has proposed the following resolution in the forthcoming special general body meeting, " To approve payment at the time of transfer of the flat, by an outgoing member @2% of the agreement value or market value whichever is higher. I feel this is illegal and hence need your advice on the same. As per model bye-law no. 38 (e) (vii) transfer fees payable at the time of transfer of a flat is Rs. 500/-. Further, under model byelaw no. 38 (e) (ix) the amount of premium payable at the time of transfer may be fixed by the general body but within limits as prescribed under Circular issued by the Department of the Co-operation, Government of Maharashtra from time to time. Under the above guidelines, the society cannot charge such premium exceeding Rs. 25,000/-. It is further provided that no additional amount towards donation or contribution to any other funds or under any other pretext shall be recovered from the transferor or the transferee. Thus the proposed resolution of the general body of the society imposing 2% of the agreement value or market value as payment for transfer of a flat would be illegal if such charges exceed the amount of Rs. 25,000/-. [Back to Top] I was staying in Vasai in a cooperative housing society in a flat on ownership basis and was paying Rs.1000/ as monthly maintenance charges. I have shifted to Andheri to government quarters and have retained the flat, which is now locked. The society demands full maintenance charges even though I do not stay there. Are they right in demanding full maintenance charges? What is my defence or right? Should I pay full maintenance charges or only 10% of the service charges? Please let me know. Non-occupation charges levied in respect of a flat in a housing society are not in respect of not occupying a flat but the same are for letting the flat. Further there is no provision in the bye laws for charging less in respect of the flat which is not occupied and consequently lying vacant. Nonoccupancy charges are also in respect of a flat which has been let out and such charges are in addition to the normal charges being levied upon the member in respect of his flat. [Back to Top] We are planning to keep fixed deposits in the bank in the name of our society towards the sinking fund, repair fund. Kindly advise whether such deposits will attract TDS and then at what rate will the same be deducted. Interest on fixed deposits by a co-operative society in a co-operative bank or a cooperative society would not attract income tax. However, interest on fixed deposits with other banks may become taxable depending upon facts of the case in view of some decisions that even in such cases if the amount deposited represents surplus out of members' contributions, such interest would be covered by concept of mutuality. The prescribed rate of TDS is 10% provided the interest income from the payer bank exceeds Rs.10000/- during a financial year. [Back to Top] Social responsibility Commissioner of Cooperative Department & Registrar of Cooperative Housing Societies (Maharashtra) Dr Krishna Lavekar, IAS, talks to Tapan Banerjee about critical issues A> Many housing societies are known to turn down request by purchasers on the basis of province or religion. Can they do such a thing? No, they cannot. No housing society can ever deny any person from buying a property on the basis of caste, creed or religion. And as far as we are concerned we will never allow such a thing to happen, if brought to our notice in time. Such arbitrary decisions of managing committees (MC) are not only illegal in the eyes of law but bad for the society at large. And therefore I would strongly urge victims of such autocratic and highhanded behaviour of MCs to come forward and lodge complaints with us. And we will ensure that they get justice. B> But what can your department do if the MC, which is an elected body, decides to frame its own rules? No, it can't frame rules which are biased and illegal. Let it be known to all concerned that MCs of housing societies are not above law and hence have to follow every rule laid down in the Cooperative Act. Flouting of rules is viewed very seriously by us and strict actions are taken against the erring MC without fear or favour. Running a housing society is a responsible task and any managing committee member trying to derive personal benefit out of his or her position in the MC promptly needs to be shown the door. And that's what we are good at and more over it's our job to see if the housing societies are functioning well and not creating unnecessary problem for flat-owners so that the very purpose of the 'cooperative' movement in the country is not defeated... c> In which way can you make a badly-managed housing society relent? We can remove a managing committee found to be indulging in financial or other irregularities. MCs are responsible for looking after the interest of all the members who have elected them to run the society on their behalf. And therefore if any managing committee is found guilty of running the society in a manner not conducive to the smooth and honest functioning of the job entrusted to them, we would have no option but to take stern action against them, which could even mean its dismissal depending upon the gravity of the offence. when the members complain to us about malpractices in their housing society we look into the matter and have often replaced the erring managing committees by appointing an 'Administrator' to look after the proper functioning of the society. D>How many members should contact the Registrar's office to register a complaint against a corrupt, irresponsible Managing Committee? Any aggrieved person can lodge a complaint and the Assistant Registrar of the concerned area of my department and he is expected to look into the matter. And for any reason the complainant feels dissatisfied, then the Deputy Registrar or his boss, the Joint registrar, or the Additional registrar can also be contacted for the redressal of their genuine grievances. They all are senior officers and I am sure that people approaching them would not be disappointed. E> Does the MC have enough powers to carry out beautification or any other work of substantial amount without calling for tenders? Any major work needs the AGM's approval. And quotations from a number of parties are required to be taken into consideration before any work is undertaken by the committee after due deliberation on the issue by all members. There should not be any hide and seek in awarding contracts. Any member should be allowed to scrutinise all the documents concerning the Society. And frankly I don't understand why managing committee members should not be transparent in their dealings. After all they are spending others’ money and not their own and therefore should be doubly cautious and judicious in spending society's money. They must understand that 'cooperative' housing society means all-round 'cooperation' among the residents. And once a housing society is registered it becomes mandatory on the part of the MC to be answerable to the members and to follow our rules. After receiving complaints we can scrutinise the 'society's' books of accounts and also seize any incriminating documents for appropriate action. F> If a number of members feel that their managing committee is out to trick the society members during the AGM can you depute your staff to be present at the meeting to prevent malpractices like bogus voting and huge expenditure passed by manipulating facts and other pressure tactics? Of course, we can. And do it as often as required. Our policy is to help anyone seeking our help that's the only way we can encourage cooperative movement and housing sector is no exception to the tough 'cooperative' law which is in existence in Maharashtra for a long time. G> I believe you had introduced a website which for some reason is not functional now. Why? We are now in the process of upgrading it for maximum benefit to both members as well as MCs of cooperative housing societies throughout the State. We are also linking it up with Mantralaya and my office so that we can keep tabs. I am sure that people who need to contact us would be able to do so with reasonable ease once our streamlining process takes shape. But before I conclude I wish to reassure victims of any housing society's high-handedness that we are with them and not to give up in their fight against the wrong-doers. [Back to Top] Our society structures have developed severe cracks and openings in beams and columns in many flats, and also, many members are complaining of water seepage and plaster peeling from walls as well as ceiling. After doing a structural survey by a licensed structural engineer, the estimate for the urgent recommended work comes to Rs.15 L. What guidance I seek from you is, which are the repairs that 'Society' has to take action on, and which repairs should be done individually by the members themselves, and under which co-operative society rules/acts? It is provided under model bye-law no. 160 (a) that the following repairs and maintenance of the property of the society shall be carried out by the society at its costs: (i) All internal roads, (ii) Compound walls, (iii) External water pipe lines, (iv) Water pumps, (v) Water storage tanks, (vi) Drainage lines, (vii) Septic tanks, (viii) Staircases, (ix) Terrace and parapet walls, (x) Structural repairs of roofs of all flats, (xi) Staircase lights, (xii) Street lights, (xiii) Outside walls of the building/buildings, (xiv) All leakages of water including leakages due to rain water, and leakages due to external common pipe line and drainage line, (xv) Electric lines upto main switches in the flats, (xvi) Lifts, (xvii) The damaged ceiling and plaster thereon in the top floor flats, on account of the leakage of the rain water through the terrace. Further it is provided in model bye-law no. 160(b) that all the repairs, not covered by the bye-law no. 160 (a) shall be carried out by the members at their cost. [Back to Top] Ihave mutually exchanged my flat with the other member having same area (So as to combine my flat with my son's Flat) as per society byelaws 41,42 &65 Society made the transfer entries in the share Certificates. Do I have to pay stamp duty and register this deed or the exchange on the Society books and share Certificate is sufficient? You will be required to pay stamp duty on the deed of exchange and you should also register the same. Provision for stamp duty payable on such deed of exchange is provided for in article 32 of Schedule-I to the Bombay Stamp Act, 1958. Stamp duty on such exchange is the same as is leviable on a conveyance under article 25 on the market value of the property of the greatest value. In your case both the flats are of the same area and in the same building. However the floor on which the two flats are located may be different. Therefore the market value of the two flats may be either the same or the market value of one flat may be slightly different than the other. For example, as per the stamp duty ready reckoner for flats located on 5th floor to 10th floor, the market value is 5% higher than for flats on ground to 4th floor and so on. Thus stamp duty will be payable only on the flat of the greater value. If the two flats are of the same value, then stamp duty will be payable on any one flat. Who has to bear the stamp duty and registration charges can be decided by the parties mutually and the same can be recorded in the deed of exchange. [Back to Top] If the building completion certificate, occupation certificate, and approved building plan are required for getting the conveyance deed in favour of the society. All the above referred documents are required to get the conveyance of land and building. In extreme cases, if the above documents are not available and if the society can impress upon the authorities alternative documents like the assessment bill from BMC or getting the plan prepared by an architect on the basis of existing structure or a reply received from BMC about the non-availability of documents, it will be sufficient to get the conveyance. This depends upon a case-to-case basis and is not the general rule. [Back to Top] Ours is a big housing society consisting of 256 units. The society is formed and was registered in November 2003. All the units are sold and occupied. The developer has given a few plots to a sub-developer for development and constructing housing units and selling. In their agreement, one of the conditions is that on developing all plots, the sub-developer will approach the developer for handing over the conveyance. Now the position is such that only one plot is yet to be developed by the sub-developer. The sub-developer is not ready to execute conveyance for our society because all plots are not developed. In fact, there is no connection of the undeveloped plot and our housing society. Six years have already passed and there is no sign of developing the vacant plot. The developer cannot impose such conditions to grant the conveyance. The developer is statutorily bound to give the conveyance within four months from the date of registration of the society. In your case, the developer should have conveyed the right, title and interest in the building and the proportionate area of land (undivided interest in the land) in favour of the society within four months of registration of the society. Once the deemed conveyance is implemented, the society should approach the Competent Authority (District Deputy . / Registrar . of Co . -operative . Societies .. ) to get the deemed conveyance certificate and get the same registered. [Back to Top] I wish to gift my flat which is in a cooperative housing society, to my cousin. Would there be any gift tax or income-tax payable, being a gift to a relative? I have held the flat for many years. What about stamp duty? Is there any concession? If the gift does not work out I can make out a will in favour of my cousin. There is no gift-tax payable for gifts made on or after 1.10.1998. However there may be income-tax payable by your cousin on such a gift, if the same is received on or after 1.10.2009. In section 56 of the Income-tax Act, 1961 in sub-section (2), clause (vii) has been inserted with effect from 1.10.2009, which inter alia provides that income-tax shall be chargeable if immovable property is received without consideration. The value of income for the purpose of incometax shall be the value of the property as shown in the stamp duty ready reckoner. Exemption is provided if the value of the property does not exceed rupees fifty thousand. Further exemption is also provided if such property is received from any relative. As per the Act, relative means (i) spouse of the individual, (ii) brother or sister of the individual, (iii) brother or sister of the spouse of the individual, (iv) brother or sister of either of the parents of the individual, (v) any lineal ascendant or descendant of the individual, (vi) any lineal ascendant or descendant of the spouse of the individual, and (vii) spouse of the person referred to in (ii) to (vi) above. However your relationship with your cousin does not fall in any one of the above categories. Exemption is also provided if the property is received on the occasion of the marriage of the individual. Stamp duty will be payable on the gift deed under article 25 of Schedule-I of the Bombay Stamp Act, 1958, which is the same as on conveyance. The market value of the flat for the purpose of stamp duty will be as shown in the stamp duty ready reckoner. Concessional stamp duty at the rate of 2% of the market value of the property on gift will not be available in your case as it is applicable only in case of gift to family members, which as per the Act are husband, wife, brother or sister of the donor or any lineal ascendant or descendant of the donor. If you make a will in favour of your cousin, then of course there is no income-tax or stamp duty applicable. [Back to Top] We wish to enter into a leave and licence agreement for a period of two years with a possibility for renewal for one more year. If we put a renewable clause, will it be necessary to enter into a new agreement after two years? It is difficult to go through the process of registration again, so can the same agreement continue? If the agreement provides for renewal, a fresh agreement will have to be entered for the third year and the same will have to be stamped and registered. If you do not wish to go through with this process at the time of renewal, you can enter into the leave and licence agreement for a period of three years now itself, with an option to either party or to one party as the case may be, to terminate the agreement upon completion of two years by giving some advance notice. For example, such advance notice can be given for one or two months. This way you need not execute a fresh agreement after two years and at the same time your purpose is served. Further the stamp duty payable on a two-year agreement with a renewal clause for one year would be the same as that for a three-year agreement. [Back to Top] Transfer of a share certificate is not a relevant aspect for the purpose of transfer under the Income Tax Act, 1961 In a co-operative housing society, can the loan be obtained for purchasing a flat without permission of the society? Are loan processing charges allowable as deduction from income from house property under income tax? Model bye laws provide that no member of the society should assign, mortgage or create any charge on his occupancy right in the flat without the previous permission in writing of the Committee. However, it is further provided that such permission of the society will not be required for assigning, mortgaging or creating any charge on the occupancy right in the flat for the purpose of obtaining loan, either for purchase of flat or for liquidating the liability incurred by him for the said purpose by way of loan or advance from the employer of the member or from the Life Insurance Corporation of India or from a bank or the Society or any other agency approved by the Commissioner for Co-operation and Registrar, C.S., Maharashtra State. The banks and financial institutions should take note of this provision under the byelaws. Ideally, a financier may give a 15 days' prior intimation to the society management requesting to inform if there are any encumbrances and on failure of the society management to inform about encumbrances, if any, the loan may be disbursed. Ideally, the concept of society management should be restricted to the common maintenance only and should not extend to interference or involvement of society managements in respect of ownership rights of flats including transfers. A person purchases a flat by investing lakhs and crores of rupees and he is buying the same on ownership basis and therefore involvement of society managements can amount to undue interference with his right to property and right to property certainly includes right to deal with the property in the manner one desires. The more the powers with society managements, higher are the possibilities of creation of vested interests. Loan processing charges in respect of acquisition of a house would not be allowed as deduction from income from house property in view of specific deductions only u/s. 24 of the Income Tax Act, 1961. [Back to Top] Can a society deal with admission of a new flat purchaser in the annual general body meeting only, which will take place after many months? Would a long delay in transfer by the society have adverse implications under the Income tax Act? Can a partnership, company purchase a residential flat and under income tax in whose hands it will stand? With regard to admission of members it is observed that many societies admit members in general body meetings only. Further, the societies do not find it necessary to call a general body meeting specifically for admitting new members with the result that the decision is generally put off to next annual general body meeting. This may create unnecessary delay for the incoming members. Such practice, however, of the societies is not supported by the law. MCS Act, 1960 specifically requires that an applicant to membership has to be admitted as a member by the society within 3 months from the date of submission of the admission application failing which he is deemed to be a member unless the refusal is supported by bonafide reasons recorded in writing. Refusal is appealable in law. Transfer of share certificate in a co-operative society is not a relevant aspect for the purpose of transfer under the Income Tax Act, 1961. Under the Income Tax Act transfer is to be construed with reference to execution of a document and possession of premises. Under the model bye law, admissions of individuals is within the purview of the managing committee. However, admission of membership to the firms, companies and other types of members has been left to the general body meeting of the society. In fact, due to the time limit specified u/s. 22 of the MCS Act and due to membership of a society being open to all u/s. 23 of the said Act, the committee should be the right authority as admission of membership is more of a procedural thing. The Maharashtra Government under the powers conferred to it by second provision to sub-section (1) of Section 22 of the MCS Act, 1960 has by an order No. CHS 1791/CR-148/14-C laid down additional terms and conditions with regard to membership of firm or company in a housing society. When a residential flat is purchased by a partnership firm or a company, the same would be the asset of the firm or company for the purposes of the Income Tax Act disregarding the fact that the same may be used for residence of its partner or director, as the case may be. [Back to Top] I have purchased a re-sold property. The procedure for this transaction is as follows: First the builder made an Agreement between himself and Mr Patel. They registered the agreement. But before possession, Mr Patel sold that flat to Mr Naik after receiving the builder's NOC. Mr Naik also registered the agreement. However, due to some reason he too, sold the flat to Mr Sathe. Up till this procedure the builder had not given any possession letter because of some pending work. Now, does Mr Sathe require any NOC letter from the builder? An agreement per se does not transfer ownership and it cannot be sold further on the basis of registered agreement. Mr Sathe requires purchasing the same with the builder only since the property is registered in his name only. The rest may act as a confirming party. [Back to Top] I have booked a 2BHK flat and the builder has mentioned other charges which are fine with me but if the builder increases these other charges demand for the excess, then what we will I do? Is there any law against the builder? What precaution can we take while booking or signing the buyer seller agreement? Please advise. While signing the Agreement fix all the charges before-hand to avoid future negotiations. The agreement should have all details of the payments to be made. It would be illegal for the builder to demand excess payments in the future. [Back to Top] My apartment construction has been completed and it is up for possession. Recently all flat owners have received a legal notice from a few persons stating that the land has been encroached. The builder has clarified and is insisting this has been a false case without any basis and builder had filed a complaint with district RDO (Revenue Divisional Office) and the RDO decided in favour of the builder. We have received the legal notice after the RDO decision. Since the flats are ready for possession, should we take a written letter from the builder that the flats are free from land encroachment so that we are safe from all future legal hassles? Kindly advise. Yes, apart from his affidavit, you should get an indemnity deed executed by the builder saying that he would be liable for the payment of any and all damages, compensation and expenses arising out of this dispute. [Back to Top] I wish to know about Free Hold plots. Can we convert agriculture land into residential plots? If yes, then, how? If the land under consideration is agricultural and if one intends to develop the said land for residential/commercial/industrial use, then such agricultural land has to be converted to non agricultural land and a Non Agriculture Order has to be obtained from the Collector of the District where the property is located. Along with this, one needs to take the latest receipts evidencing payment of Non Agriculture Tax. In cases where the conversion from agricultural use to non-agriculture use is not done within the stipulated period then, there should be an order from the concerned authority extending the period. [Back to Top] I booked a flat in March 2008. The agreement was executed in February 2010. In the brochure as well as in agreement, the builder promised to give a club house for which a proportional amount was paid with all paid installments, but the builder has not commenced even foundation work for the club. He has, though, completed construction of the flat and building in which the flat is located but has not obtained the Completion Certificate. I have yet to pay the final installment i.e. 5% of cost of the flat which as per the terms of agreement, is to be paid after taking possession. Will it be legally correct to take possession in absence of Completion Certificate? Ask for the Completion Certificate before taking the possession or make a clause in the agreement that the builder will provide all the property documents within the relevant time including CC. [Back to Top]