A Legal Overview on Indian Real Estate

Prepared by:- Mr. Vishu Kushwaha

REAL ESTATE
An Introduction

Figure 1 Source: DTCP, GoAP (1972)

The term real estate is defined as land, including the air above it
and the ground below it, and any buildings or structures on it. It is
also referred to as realty. It covers residential housing, commercial
offices, trading spaces such as theatres, hotels and restaurants,
retail outlets, industrial buildings such as factories and
government buildings. Real estate involves the purchase, sale, and
development of land, residential and non-residential buildings.
The main players in the real estate market are the landlords,
developers, builders, real estate agents, tenants, buyers etc. The
activities of the real estate sector encompass the housing and
construction sectors also.
The real estate sector in India has assumed growing importance
with the liberalization of the economy. The consequent increase in
business opportunities and migration of the labor force has, in
turn, increased the demand for commercial and housing space,
especially rental housing. Developments in the real estate sector
are being influenced by the developments in the retail, hospitality
and entertainment (e.g., hotels, resorts, cinema theatres)
industries, economic services (e.g., hospitals, schools) and
information technology (IT)- enabled services (like call centers)
etc. and vice versa.

The real estate sector is a major employment driver, being the

second largest employer next only to agriculture. This is because
of the chain of backward and forward linkages that the sector
has with the other sectors of the economy, especially with the
housing and construction sector. About 250 ancillary industries such
as cement, steel, brick, timber, building materials etc. are
dependent on the real estate industry.

Indian Real estate sector is one of the most thriving industries of

the present times. And if industry experts are to be believed, the
prospects of Indian property market is going to attract all major
investors to this vast land of opportunities in coming years thereby
giving a boost to already raising foreign direct investment.
The Government of India has taken positive initiatives by offering
the best in terms of real estate investment, by altering its FDI
policies from time to time. With better infrastructure and
availability of world class facilities, property in Indian prominent
cities are the most sought after proposition. No wonder, this part of
the globe i.e. India will emerge as the ultimate place for investment
in contemporary retail, residential or commercial space in coming
years.
The boom in the sector has been so appealing that real estate has
turned out to be a convincing investment as compared to other
investment vehicles such as capital and debt markets and bullion
market. It is attracting investors by offering a possibility of stable
income yields, moderate capital appreciations, tax structuring
benefits and higher security in comparison to other investment
options.
With property boom spreading in all directions, real estate in
India is touching new heights. However, the growth also depends

on the policies adopted by the government to facilitate

investments mainly in the economic and industrial sector. The
new stand adopted by Indian government regarding foreign direct
investment (FDI) policies has encouraged an increasing number of
countries to invest in Indian Properties.
India has displaced US as the second-most favored destination
for FDI in the world. The positive outlook of Indian government
is the key factor behind the sudden rise of the Indian Real Estate
sector - the second largest employer after agriculture in India. The
growth curve of Indian economy is at an all- time high and
contributing to the upswing is the real estate sector in particular.
Investments in Indian real estate have been strongly taking up over
other options for domestic as well as foreign investors.
Why Invest In Indian Real Estate?
The Indian real estate sector still occupies a pivotal position in terms
of the multiplier effect on the economy, if you compare it with other
major sectors. This position is also supported by the confidence which
has been instilled by the government policies. Infrastructure sector
such as roads, ports, railways and airports has been given a broad
framework to enhance, during the 12th five year plan (2012-2017).
Mostly via public private partnerships (PPPs).
There are a number of key factors which is driving the real estate
sector to new heights in India include:
Rapid urbanization;
Rising income levels;
Strong growth in Indias tourism sector;
Growth of the service sector;
Population growth;
Positive demographics;
Increased foreign investments;
Growth of the Indian middle class;
Entry of international retailers in India;
Influx of multinational companies;
Growth in organized retail;
Increasing demand from Non Resident Indians (NRIs)
LEGISLATIVE ISSUES

Various Laws Involved in Real Estate Transactions

The various laws governing the real estate transactions have been
abridged as follows:
o

The Indian Contract Act, 1872.

o The Transfer of Property Act,
1882. o
The Indian
Registration Act, 1908. o
The
Specific Relief Act, 1963.
o The Urban Land (Ceiling & regularization) Act,
1976.
o The Land Acquisition
Act,2013. o The Indian
Evidence Act, 1872. o The
Indian Stamps Act, 1899.
o The Rent Control Act.
o The State Laws governing the real estate.
o The Consumer Protection Act, 1986
o The Arbitration & Conciliation Act, 1996
o Income Tax Act, 1961.
o The Wealth Tax Act, 1957
o The Co-operative Societies Act, 1912
o The Multi-state Co-operative Societies Act, 2002

The Laws applicable to Real Estate Business can be

divided in five groups:
1.
2.
3.
4.
5.

Land Related Laws

Environment Laws
Construction Laws
Registration Laws
Labour Laws

Provisions of other laws in consonance with the LARR 2013:

The LARR Act 2013 exempted 13 laws (such as the National Highways
Act, 1956 and the Railways Act, 1989) from its purview. However, the
LARR Act 2013 required that the compensation, rehabilitation, and
resettlement provisions of these 13 laws be brought in consonance
with the LARR Act 2013, within a year of its enactment, through a
notification.
The Ordinance brings the compensation, rehabilitation, and
resettlement provisions of these 13 laws in consonance with the LARR
Act 2013.
Exemption of five categories of land use from certain provisions:
The Ordinance creates five special categories of and use:
(i) Defense,
(ii)

Rural infrastructure,

(iii) Affordable housing,

(iv) Industrial corridors,

(v) Infrastructure projects including Public Private
Partnership (PPP) projects where the central government
owns the land.

The LARR Act 2013 requires that the consent of 80% of land owners
is obtained for private projects and that the consent of 70% of land
owners be obtained for PPP projects. The Ordinance exempts the five
categories mentioned above from this provision of the Act.
In addition, the Ordinance permits the government to exempt projects
in these five categories from the following provisions, through a
notification:
The LARR Act 2013 requires that a Social Impact Assessment be
conducted to identify affected families and calculate the social impact
when land is acquired.
The LARR Act 2013 imposes certain restrictions on the acquisition of
irrigated multi-cropped land and other agricultural land. For example,
irrigated multi-cropped land cannot be acquired beyond a limit
specified by the government.
Return of unutilised land: The LARR Act 2013 required that if land
acquired under it remained unutilised for five years, it was returned to
the original owners or the land bank. The Ordinance states that the
period after which unutilised land will need to be returned will be five
years, or any period specified at the time of setting up the project,
whichever is later.
Time period for retrospective application: The LARR Act 2013 states
that the Land Acquisition Act, 1894 will continue to apply in certain
cases, where an award has been made under the 1894 Act. However,
if such as award was made five year or more before the enactment of
the LARR Act 2013, and the physical possession of land has not been
taken orcompensation has not been paid, the LARR Act 2013 will
apply.
The Ordinance states that in calculating this time period, any period
during which the proceedings of acquisition were held up: (i) due to a
stay order of a court, or (ii) a period specified in the award of a
Tribunal for taking possession, or (iii) any period where possession
has been taken but the compensation is lying deposited in a court or
any account, will not be counted.
Other changes:
The LARR Act 2013 excluded the acquisition of land for private
hospitals and private educational institutions from its purview. The

Ordinance removes this restriction.

While the LARR Act 2013 was applicable for the acquisition of land
for private companies, the Ordinance changes this to acquisition
for private entities. A private entity is an entity other than a
government entity, and could include a proprietorship, partnership,
company, corporation, non-profit organization, or other entity under
any other law.
The LARR Act 2013 stated that if an offence is committed by the
government, the head of the department would be deemed guilty
unless he could show that the offence was committed without his
knowledge, or that he had exercised due diligence to prevent the
commission of the offence.
The Ordinance replaces this provision and states that if an offence is
committed by a government official, he cannot be prosecuted without
the prior sanction of the government.

COMPUTATION OF SERVICE TAX ON UNDER CONSTRUCTION PROPERTY

PARTICULARS

ABATEMENT
ALLOWED

TAXABLE
COMPONENT

NORMAL
RATE OF
SERVICE TAX

FLAT SIZE
OVER 2000 sq
ft.
(carpet area)
Sale price of flat
over Rs 1 crore
In all other cases
except
specifically
exempted (As
mentioned
above)

70%

30%

14%

EFFECTIVE
RATE OF
SERVICE TAX
ON PROPRTY
4.20%

70%

30%

14%

4.20%

75%

25%

14%

3.50%

contact
landowner,
farmers etc.

conduct
market
studies to
assess the
demand for
end users

P1:
Feasibility
study

land plan
estimates
the land
development
cost, and
profitability

NDA

P2:
land
acquisition

buy land from

landowners,
farmers, etc.
payment
made as per
the land
acquisition
act
develops land
use and traffic
circulation
plan
constructs
streets,
lighting, and
subsurface
improvemnets
(utilities,
drainage,sewa
ge)

P3:
P3: land
development

subdivides
individual
sites, and
sells
smallersites
to builders
and project
developers.

retain some
retail sites for
later sale

Land Acquisition Act

these
builders and
developers
develop
residential or
commercial
buildingsas
the
governing
rules

sold to end
users

sold to
investors

1894

2013

2014

Social impact
assessment
(SIA)

No Provision

SIA is a must for every

acquisition

Consent from affected

people

No provision

Multi crop land

No provision

Consent of 80% of
displaced people
required in case of
acquisition for private
companies and publicprivate partnerships.
Only in extreme
circumstances, where
multi-cropped land has
to be acquired at any
cost, only 5% of the
total multi cropped land
in the district can be
acquired and not more.

Not required if for

security, defense, rural
infra, industrial
corridors and social
infra
Not required if for
security, defense, rural
infra, industrial
corridors and social
infra
Multi-crop irrigated
land can also be
acquired if for security,
defense, rural infra,
industrial corridors and
social infra.

Otherwise, multicropped land should not

be acquired.
CHART DEPICTING
LINK BETWEEN
LIVELIHOOD AND
LABOR RIGHTS

Property buying and

registration process:
India is home to a very
real estate market, land
is considered as very
strong and viable investment also a home in India has many intrinsic values. Able to buy or built ones own
home is a dream for all and hence residential market is always in demand and performs well.
But there are certain boxes which are needed to be ticked before considering to buy a property or to build one.
There are certain policies rules and processes which are needed to be taken care of.
Things to be remember when buying land, flat or a house:

Check the land title: many a times dispute over the property arises only because
of the land title

Once all the initial checks are made and the land to be bought is properly examined and the negotiation of the
price is done, comes the process of actually buying the land.
The first step of actually buying the land is to draft an agreement between the parties involved in the transaction.
An agreement is made to make sure that none of the parties involved in the transaction change their mind and go
back on what has been decided about the transaction.

This agreement has to be made on Rs.50 stamp paper.

The agreement should cover the following basic things:
Agreed cost of the land between seller and buyer
Advance amount given by the buyer
Time span in which the actual sale should take place
What procedure has to be adopted if any of the parties default on the agreement
How the losses have to be covered if any of the parties default
Particulars of the land
An experienced lawyer should carefully draft this agreement. Many a times, because of an agreement that is not
well drafted it becomes possible for one of the parties to default and get away with it.
A long with this agreement, the agreed advance has to be paid by the buyer. After the document is drafted and
verified it has to be signed by both parties and two witnesses.
The next step is to prepare a title deed. You could get the title deed written by a government licensed Document
Writer.
Even lawyers can prepare the deed, but the document can only be computer printed or typed, not handwritten.
Only those who hold the scribe license can prepare handwritten documents. Make sure all the details
mentioned are accurate.
After the agreement is prepared, the next step is Registration
The land is to be registered in a sub registrar office. If there is incorrectness in the documents after registering,
new documents with the correct details have to be registered and depending on the incorrectness, the registration
expenses will have to be repeated.
Make sure that the title deed is registered within the time limit mentioned in the agreement.
Along with the title deed, the other documents that are required for registration are:
Original title deed
Previous deeds
Property/House Tax receipts
Torence Plan (optional) etc. plus two witnesses are needed for registering the property.
What is a Torence plan?
Torence plan is a detailed plan of the property prepared by a licensed surveyor that will have accurate details of
the measurements including width, length, borders etc. This plan is needed only in some specific areas.
For land costing more than 5 lakhs, the seller should submit either his Pan card or Form Number 16 during
registration.
The Expenses Involved
The expenses involved during registration include Stamp Duty, registration fees, Document writers/lawyers fees
etc.
The stamp duty will depend on the cost of the property and varies from location to location. 2% will be charged
as the registration fees. Document writers fees also depend on the cost of the property and varies with
individuals. There is a percentage prescribed by the government as Document writers fee and they cannot charge
more than the prescribed limit.
The actual process of registration at the sub-registrars office:
Take all the documents mentioned above.
Submit the document along with input form at the token window and get the token number.
Wait till the token number is announced.
On token number being announced, all parties to the document must present themselves before the sub-registrar
to admit execution of the document, photographed, thumb impression and signature taken on additional sheet of
paper in presence of sub-registrar.
Pay the required registration fees and computer service charges in cash as per the receipt (Computer service
charges are @ Rs.20 per page)
The document will be returned within 30 minutes of getting the receipt

Year

Policy announcements

Indian real estate performance

2000

Press note 2, 2000 100% FDI

in hospitals and industrial parks
under automatic route

Investment volumes remains low as

the sector is only showing limited
growth.

2001

Press Note 4, 2001 100% FDI

under automatic route in hotels

Private developers were limited and

the office sector was still to see
enough critical mass for attracting
significant investment volumes

2003

Press Note 3, 2003 100% FDI

integrated townships with
minimum 100 acres or 2000
dwelling units under FIPB
approval route

2005

Press note 2, 2005 100% FDI

in construction development
projects of 50,000 sqm under
automatic route
Minimum Capitalisation USD
10 million

SEZ Act, 2005

2008
2011

2014

Press Note 3, 2008 100% FDI

in established and for setting up
of industrial parks without
restrictions of Press Note 2,
2005 based on certain criteria
/conditionalities
Software Technology Parks of
India (STPI) Policys Sunset
clause

2005 2008
Office net absorption 114mn
sq ft
PE investment - ~USD 9
Billion
IT, Commercial office share -~
USD 3 billion
Residential share -~ USD 2.2
Billion

2011-2013
Office net absorption 91 mn
sq ft.
PE investment -~ USD 4
billion
IT, commercial office share -~
USD 1 billion
Residential share -~ USD 2
billion
Area requirement for 100% FDI Systematic and regulatory changes on
in construction development
the anvil to create a suitable
projects reduced to 20,000 sqm investment climate.
Minimum capitalization
reduced to USD 5 million
REIT guidelines and rules
Framed by securities and
exchange board of India (SEBI)

Changes in FDI policy and REITs

likely to bring in more private equity
and better access to structured capital

REAL ESTATE TRANSACTIONS IN INCOME TAX ACT, 1961

Real estate transactions are one of the main source for generation and application of
black money. The Government is regularly trying to plug loop holes in such
transactions by inserting various provisions from time to time in the Income Tax Act
and for this number of amendments have been introduced in the Income Tax Act in
recent years. The most important amendments in this regard are sections 56(2)(vii),
section 50C and section 43CA which covers more or less all types of transactions
related to transfer of immovable property. The Finance Act, 2013 has also introduced
section 194IA for deduction of tax at source in case of sale of immovable property.
Section 56(2)(vii) of the Income Tax Act, 1961 deals with transfer of an immovable
property being received by an Assessee as Capital Assets. Section 50C of the
Income Tax Act, 1961 deals with consideration amount received on transfer of
immovable property held as Capital Assets. Section 43CA of the Income Tax Act,
1961 deals with consideration amount received on transfer of immovable property
other than Capital Assets. Section 50C of the Income Tax Act, 1961 is applied in case
of Capital Gain whether Short Term or Long Term. Section 43CA of the Income Tax Act,
1961 has been introduced in the Income Tax Act, 1961 by the Finance Act 2013
w.e.f. 1-04-2014. This section has made all the hue and cry among the real estate
dealers.

Section 56(2)(vii) of the Income Tax Act, 1961

"(vii) where an individual or a Hindu undivided family receives, in any previous
year, from any person or persons
(b) any immovable property,

(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees,
the stamp duty value of such property;
(ii)
for a consideration which is less than the stamp duty value of the property
by an amount exceeding fifty thousand rupees, the stamp duty value of such property
as exceeds such consideration:
Provided that where the date of the agreement fixing the amount of consideration for
the transfer of immovable property and the date of registration are not the same, the
stamp duty value on the date of the agreement may be taken for the purposes of this
sub-clause:
Provided further that the said proviso shall apply only in a case where the amount of
consideration referred to therein, or a part thereof, has been paid by any mode other
than cash on or before the date of the agreement for the transfer of such immovable
property"
Salient features of Section 56(2)(vii) of the Income Tax Act, 1961
1)

The section applies only to individuals and HUFs. Transactions related to

purchase of property by company, partnership firm, LLP, Trust, AOP, AJP are out
of the purview of this section.

2)

The stamp duty value of immovable property should be more then Rs.50,000/- if
property is transferred without any consideration.

3)

The difference in stamp duty value and consideration amount received should
be less then Rs.50,000/- if the immovable property is transferred without
inadequate consideration.

4)

In case of point no 2 above, stamp duty value shall be treated as deemed

consideration for the purpose of Income Tax.

5)

In case of point no 3 above, stamp value shall be treated as deemed

consideration for the purpose of Income Tax, if the value of stamp duty is higher
than consideration value by more than Rs.50,000/-

6)

If the consideration amount has been paid by mode other than cash either
or fully in the year of agreement prior to the year in which the registration
property is done, the stamp value of the property of the year in
agreement to sell was executed shall be treated as deemed consideration
year of registration for the purpose of Income Tax.

Section 43CA of the Income Tax Act, 1961

partly
of the
which
in the

"(1) Where the consideration received or accruing as a result of the transfer by an

assessee of an asset (other than a capital asset), being land or building or both, is
less than the value adopted or assessed or assessable by any authority of a State
Government for the purpose of payment of stamp duty in respect of such transfer,
the value so adopted or assessed or assessable shall, for the purposes of
computing profits and gains from transfer of such asset, be deemed to be the full
value of the consideration received or accruing as a result of such transfer.
(2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as
may be, apply in relation to determination of the value adopted or assessed or
assessable under sub-section (1).
(3) Where the date of agreement fixing the value of consideration for transfer of the
asset and the date of registration of such transfer of asset are not the same, the
value referred to in sub-section
(1) may be taken as the value assessable by any authority of a State Government for
the purpose of payment of stamp duty in respect of such transfer on the date of the
agreement.
(4) The provisions of sub-section (3) shall apply only in a case where the amount of
consideration or a part thereof has been received by any mode other than cash on or
before the date of agreement for transfer of the asset."
Salient feature of Section 43CA of the Income Tax Act, 1961
1) This section applies to trading assets and not to capital assets.
2) The consideration value should be less then stamp duty value.
3) If the consideration amount has been paid by cheque either partly or fully in
the year of agreement prior to the year in which the registration of the property
is done, the stamp value of the property of the year in which agreement to
sell was executed shall be treated as deemed consideration in the year of
registration for the purpose of Income Tax.

4) Controversial Issue
5)
6) A controversy has arisen in respect of applicability of year of this section.
Whether this section applies in the year when agreement to sale was made and
possession has been given or when the conveyance was registered. Let us take an
example.

7)
8) A has sold a flat to B in Financial Year 2010 2011 for a consideration of
Rs.50 lakhs. An Agreement to Sale was made between A and B. The possession of

the flat was given by A to B during the financial year 2011 2012. The sale deed was
executed in June 2013 and stamp duty was paid at a value of Rs.75 Lakh by the buyer.
A has already booked the sale in its accounts in the year 2011 2012 and have filed
its return of income and have paid tax there on. Now the question arises that after
insertion of section 43CA is A liable to pay further tax on difference between
consideration amount and stamp duty value as sale deed was executed in the current
financial year?

9)
10) Section 43CA of the Income Tax Act, 1961 applies when the immovable property
is transferred. In the Income Tax Act, transfer in relation to capital assets has been
defined in section 2(47) of the Income Tax Act, 1961. In case of trading assets, the
Act is silent and therefore, we will have to look in to the Transfer of property Act,
1882. Section 5 of the Transfer of Property Act deals with Transfer of immovable
Property. The said section is reproduced below

11)
12) Transfer of Property means an act by which a living person conveys property,
in present or in future, to one or more other living persons, or to himself and one or
more other living persons; and to transfer property is to perform such act.

13)
14) In this section living person includes a Company or Association or Body of
Individuals, whether incorporated or not, but nothing herein contained shall affect
any law for the time being in force relating to transfer of property to or by
Companies, Associations or Bodies of Individuals.

15)
16) Hence, transfer of property takes place only when it is conveyed. Section 53A
of Transfer of Property Act, 1882 is not applicable in case of section 43CA of the
Income Tax Act, 1961 because it relates to capital assets as per provision of section
2(47) of Income Tax Act, 1961. Delivery of possession of immovable property
cannot by itself be treated as equivalent to conveyance of immovable property as
held by the Honble Apex Court in the case of Alapati Venkataramiah Vs.
Commissioner of Income Tax, Hyderabad reported in 57 ITR 185. Until and
unless the title of the property is passed to the purchaser, there cannot be a sale
or transfer of immovable property. Reliance can also be placed in deuces ion By:
ITAT, Bench `A, Chennai, in the case of R.Gopinath (HUF) v. ACIT, Appeal No:
ITA Nos. 29 & 30/Mds/2008, decided on July 24, 2009.

17)
18) As per provision of section 5 of Transfer of Property Act 1882, and also as per the
above decisions, in my view in the above mentioned example, A will have to pay more
tax on the difference in value of stamp duty and consideration amount as per
provision of section 43CA of the Income Tax Act, 1961 for the assessment year 2014
2015.

19)
20)
21)

Development Agreements

22) In case of development agreement for an immovable property, Long Term Capital
Gain may arise as per section 2(47) of the Income Tax Act, 1961, if the land is
capital assets, Section 43CA of the Income Tax Act, 1961 in case of development
agreement at the time of possession does not apply.
23)
We must also look it to Section 50D of the Income Tax Act, 1961 which has
come in to operation
24)
w.e.f 01-04-2013 only in respect of taxability of development agreement.

25)
26)
27)

Section 50D of the Income Tax Act, 1961

28) Where the consideration received or accruing as a result of the transfer of a

capital asset by an assessee is not ascertainable or cannot be determined, then, for
the purpose of computing income chargeable to tax as capital gains, the fair market
value of the said asset on the date of transfer shall be deemed to be the full value
of the consideration received or accruing as a result of such transfer.

29)
30) The conditions for applicability of provision are:
31)
32) Consideration must be received or accruing if consideration is not received
or accrued in the previous year, then provision will not apply. For example, if a
consideration or part of consideration shall be received or accrued in future, then the
provision will not apply. In case a developer will provide some of constructed area, to
land owner, on completion of project, then the consideration to be received in kind in
future, is not consideration received or accrued, therefore, in such cases the provision
of Section 50D of the Income Tax Act, 1961 will not be applicable.

33)
34) There must be transfer of capital asset if there is no transfer, then this section
will not apply. Here transfer of capital asset can mean a definite and absolute
transfer. A transfer of some of rights for limited purposes cannot be regarded as
transfer of capital asset in the context of tax on capital gains. There should not be a
situation of contingent transfer which can be revert back on some contingencies. The
transfer must be full and final. Readers are requested to go through definition of
transfer in relation to a capital asset provided in section 2(47) of the Income-tax
Act, 1961 and also to see exemption from meaning of transfer as provided in section
47 of the Act.

35)
36) Consideration should not be ascertainable or cannot be determined thus if
consideration can be ascertained or determined, even in future, then this provision
may not be applicable. For example, if a part of consideration will be given in kind,
say some of constructed area in a project, then the situation is one in which
consideration will be received and it will be ascertainable in future so in such
situation Section 50D of the Income Tax Act, 1961 may not be applicable depending
on facts of the case.

37)
38) This provision is only for the purpose of computing income chargeable to tax as
capital gains. This provision is not applicable in case of business income or income
falling under head other sources or income from house property etc.

39)
40) In case of Joint Development Agreements where development rights for identified
land are exchanged for a specified percentage of built up area in the project, there is
no way of determining the value of consideration at the time the development rights
are transferred. However, post the proposed amendment, the FMV of the
development rights or the built up area may be determined and the gains shall be
liable to capital gains tax. The basis which the FMV is required to be determined
has not been specified.

41)
42)

43)
44)

Therefore, the insertion of Section 50D may have significant implications.

When the incidence of capital gain tax arises?

45)
The point where the capital gain is deemed to accrue will purely depend
on the terms of Joint
46) Development Agreement. Where the agreement is of such nature that
possession is given in part performance of a contract, the liability of capital gain tax
will arise on the handing over of such possession to the builder.

47)
48) If the possession is not transferred but deferred until the construction is
completed, the liability to capital gain tax will arise in the year in which the
developer completes the construction.

49)
50)

Applicability of Capital Gain if Development Agreement breaks down

51)
52) If the developer is liable for the breaking down of joint development
agreement, then either the landowner will get compensation from the developer for
the breach of contract or developer have to do specific performance as per the
terms of the Joint Development Agreement, in both cases landowner will acquire.
And, for charging what landowner has acquired from the developer under capital gain
tax, it should first come under the definition of capital asset. Reliance can be placed
in CIT vs Vijay Flexible Containers [1990] 186 ITR 691 (Bom.) and K. R.
Srinath vs ACIT, [2004] 141 Taxman 268 (Mad).

53)
54)
55)

TDS on sale of immovable property

56) The Finance Bill, 2013 has introduced a new section 194-IA providing for TDS
@ 1% to be deducted by purchaser. In case valid PAN of seller is not available, tax
deduction will be at higher rate of 20%. This is applicable w.e.f. June 01, 2013 for
sale of immovable property (other than agricultural land) where consideration is Rs.
50 Lakhs and above. The purchaser is exempt from the obligation to obtain TAN, which

is otherwise mandatory for all Deductors.

57)
58)
59)

Agriculture Land and TDS

60) It may be noted that the Agricultural Land has been excluded from the ambit of
this new provision, however all agricultural lands are not excluded and that the
agricultural land which is comprised within the jurisdiction of a municipality having
population between 10,000 to 1,00,000 as well as land which is not more than 2
Kilometres or has population between 1,00,000 to 10,00,000 as well as land which is
not more than 6 Kilometres or population above 10,00,000 as well as land which is not
more than 8 Kilometres of the local limits of any municipality would come within the
purview of making compliance as per the above section 194LA and thus in respect
of this category of agricultural land the formalities of TDS are required to be complied
with.

61)
62) CBDT has issued Notification No. 39/2013 on 31st May 2013 amending rules to
simplify procedure for complying with provisions of this new section.

63)
64) In exercise of the powers conferred by section 295 of the Income-tax Act, 1961
(43 of 1961), the Central Board of Direct Taxes hereby makes the following rules
further to amend the Income-tax Rules, 1962, namely:

65)
1. (1) These rules may be called the Income-tax (Fifth Amendment) Rules, 2013.

66)
67) (2) They shall come into force on the date of their publication in the Official
Gazette.

68)
2. In the Income-tax Rules, 1962, (hereinafter referred to as the said rules) in rule 30,

69)
(a)after sub-rule (2), the following sub-rule shall be inserted, namely:
(b)
(2A) Notwithstanding anything contained in sub-rule (1) or sub-rule (2),
any sum deducted under section 194-IA shall be paid to the credit of the Central
Government within a period of seven days from the end of the month in which the
deduction is made and shall be accompanied by a challan-cum-statement in Form
No.26QB.;

(c)
(b)

after sub-rule (6), the following sub-rule shall be inserted, namely:

(d)
(e)
(6A) Where tax deducted is to be deposited accompanied by a challancum-statement in Form No.26QB, the amount of tax so deducted shall be
deposited to the credit of the Central Government by remitting it electronically
within the time specified in sub-rule (2A) into the Reserve Bank of India or the
State Bank of India or any authorised bank.;

(f)

(c)after sub-rule (7), the following sub-rules shall be inserted, namely:

(g)
(h)
(7A) The Director General of Income-tax (Systems) shall specify the
procedure, formats and standards for the purposes of remitting the amount
electronically to the Reserve Bank of India or the State Bank of India or any
authorised bank and shall be responsible for the day- to-day administration in
relation to the remitting of the amount electronically in the manner so specified.;

(i)
3. In rule 31 of the said rules,
(a)after sub-rule (3), the following sub-rule shall be inserted, namely:

(j)
(k)
(3A) Notwithstanding anything contained in sub-rule (1) or sub-rule (2)
or sub-rule (3), every person responsible for deduction of tax under section 194IA shall furnish the certificate of deduction of tax at source in Form No.16B to the
payee within fifteen days from the due date for furnishing the challan-cumstatement in Form No.26QB under rule 31A after generating and downloading the
same from the web portal specified by the Director General of Income-tax (System)
or the person authorised by him.;

(l)
(b)

after sub-rule (6), the following sub-rule shall be inserted, namely:

(m)
(n)
(6A) The Director General of Income-tax (Systems) shall specify the
procedure, formats and standards for the purposes of generation and download of
certificates and shall be responsible for the day-to-day administration in relation to
the generation and download of certificates from the web portal specified by him or
the person authorised by him.;

(o)
4. In rule 31A of the said rules, after sub-rule (4), the following sub-rule shall be
inserted, namely:

(p)
(q)
(4A) Notwithstanding anything contained in sub-rule (1) or sub-rule (2) or
sub-rule (3) or sub rule (4), every person responsible for deduction of tax under
section 194-IA shall furnish to the Director General of Income-tax (System) or
the person authorised by the Director General of Income-tax (System) a challancum-statement in Form No.26QB electronically in accordance with the procedures,
formats and standards specified under sub-rule (5) within seven days from the end
of the month in which the deduction is made.;

(r)
5. In Appendix-II of the said rules,

(s)
(a)after Form No.16AA, the following Form shall be inserted, namely:
(b)

FORM 16B

(c)
(d)

TDS on compulsory acquisition of Immovable Property

(e)
(f) In respect of compulsory acquisition of immovable property, TDS is also required
to be made on compensation amount exceeding Rs 2,00,000/- @10% as per
provision of section 194LA of the Income Tax Act, 1961. This section does not apply
in case of compensation received for agriculture land.

(g)
(h) Hardship in Let out Property
(i)
(j) Sections 43CA of the Income Tax Act, 1961 and section 50C of the Income Tax
Act, 1961 create problems for genuine Assessees. If a person has a building which
is occupied by tenants, cannot fetch market price if sold. Such property can hardly
fetch 25% value of the stamp duty value. Such property owner may have to pay tax
more than consideration amount being received by him. In future, no one would be
able to sell the litigated or let out property. The Finance minister should look in to
such problems and should make the appropriate amendment to remove genuine
hardship to the immovable property owner.

(k)
(l) Hardship in claiming exemption u/s 54 or 54F
(m)
(n) In case of long term capital gain on sale of residential house, if the sale
consideration is invested in buying another residential house, no capital gain tax will
be charged as per provision of section 54 of the Income Tax Act, 1961. But I would
like to mention one case in which in spite of availing exemption u/s 54 the Assessee
has to bear tax liability.

(o)
(p) Mr. A is owner of a residential flat. The acquisition value of said house was for
say Rs.25,00,000/- and it's index cost was Rs 50,00,000/-. X sales that flat at
Rs.73,00,000/- and buys another flat at Rs.75,00,000/- to claim exemption u/s 54F of
the Income Tax Act, 1961. The stamp duty of flat sold is Rs.85,00,000/- and stamp
duty value of the house purchased is Rs.90,00,000/-. He will have to bear tax
liability on Rs.13,00,000/- u/s 50C of the Income Tax Act, 1961 and
Rs.15,00,000/- u/s56(2)(vii) of the Income Tax Act, 1961 plus proportionate tax
on capital gain tax for not investing entire sales consideration in new house. Even if
he does not claim any exemption he will pay much less tax. So even if the exemption
u/s 54 or 54F of the Income Tax Act, 1961 is claimed, the Assessee may not get any
benefit due to insertion of these sections such as 50C and 56(vii).

(q)
(r) Conclusion
(s)
(t) Some of the state governments are revising value of stamp duty continuously
and also without looking at real market value in the particular locality. The market
price in a particular locality of immovable property may differ due to various factors
but the stamp duty value remains the same in a particular locality. The state
Government should not think about its own revenue but should also take other factors

in to account regarding location of the property.

(u)
(v) The assessee should be careful in selling or buying immovable properties. The
Assessee should also look in to TDS on sale of immovable property exceeding
Rs.50,00,000/-. In light of all the provisions discussed above, it reveals that all types
of Assessees are covered by the above mentioned
provisions
related
to
Real
Estate transactions
excepting
in
case
of Companies, Partnership Firm, LLP,
Trusts etc., where if an immovable property is bought, stamp duty value has no
significance and as such immovable property can be bought at a price below stamp
duty value. We hope in the next Finance Bill the Finance Minister may cover the
transfer of

(w) immovable property by persons other than individuals and

HUFs under the purview of section
(x) 56(2)(vii) of the Income Tax Act, 1961 or section 43CA of the
Income Tax Act, 1961.

(y)
(z)
(aa)
(ab)
(ac)
(ad)

(ae)

SECTIO
N

ASSESS
EE

(ah)

(ai)

Sec.54

Individu
al/

(aj)
H.U.F

(ap)

(aq)

Sec.54B

Individu
al/

(ar)
H.U.F

(af)

CONDITION

(ag)

Long term residential

house to be transferred.

(ao)

(ak)

(al)
(am)

EXEM
PTION
cost of
new house or
up to C.G

Within the period of 1

year before or 2 year after
the date of transfer, a
residential house is
purchased or with in a
period of 3 year a
residential house is
constructed.

(an)
(as)

Agricultural land to
be transferred (same must
be used in 2 year
immediately preceding the
date of transfer for
agricultural purpose by
individual or parents.

(aw)

Cost of
new
Agricultural
Land or up to
C.G

(at)
(au)

Within the period 2

years the date of transfer
another agricultural land is
purchased.

(ax)

(ay)

Sec.54D

Any

(az)
Assesse

(bc)

(bd)

Sec.54E
C

Any

(be)
Assesse

(av)
(ba)

Land, building or any

right In land forming part of
industrial undertaking must
be compulsory acquired.
(bf)
Transfer a long term
capital asset with in a
period of 6 months from the
date of transfer amount of
C.G should have been
invested in specified bond
issued REC or NHAI.
(bg)
The above bond shall
not transfer or covert or
avail loan within a period of

(bb)

Cost of
new assets or
up to C.G

(bj)

Amoun

t of
investment in
the specified
bonds or
capital gains
whichever in
lower.

3 year.

(bh)
(bi)

Maximum amount of
investment shall not exceed
50 lakhs during the year.

(bk)
(bl)
(bm)
(bn)
(bo)
(bp)
(bq)
(br)
(bs)
(bt)

(bu)

List of documents to be verified before buying a land / plot/ flat

(bv)
(bw)
(bx)
(by)
(bz)
(ca)
(cb)
(cc)
(cd)

Sale deed, title deed, mother deed, conveyance deed

RTC (record of rights, tenancy and crops) extracts
Katha certificates and extracts
Mutation registration extracts
Joint development agreement
POA (Power of attorney)
Sanctioned building plan
NOC from water, electricity, water and municipality department
Sale & construction agreement between developer/builder & first

Sr.
N
o
1.
2.
3.
4.
5.
6.
7.
8.
9.

owner
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.

(ce)
Copy of possession letter from builder/ Developer
(cf) Any loans
(cg)
Sale agreement with the seller
(ch)
All paid tax receipts
(ci) Encumbrance certificate up to date for last 13 years
(cj) Demand letter from vendor before disbursement
(ck)
NOC from society / Building
(cl) No due certificate
(cm)
Approved Plan
(cn)
Layout approval plan
(co)
Auction sale confirmation letter from local authority
(cp)
Release Deed if any
(cq)
Completion certificate
(cr)
Occupancy certificate
(cs)
Deed of Declaration
(ct) Latest electricity bill

(cu)
(cv)
(cw)

Buying land in India for investment or for living is considered to be a

major move financially and emotionally. Before you invest a huge chunk of
your savings in a scheme that looks attractive or in a piece of land which looks

its going to boom in the next 5 years, watch where you step.

(cx)
(cy)

There is also another reason, why I am writing this article One of my

close friends recently got fleeced in a land deal and had to face heavy losses.
(cz)
Here is a lowdown on the few things you must know before you buy land
in India hopefully it will help our readers to get a quick idea as to what all
things that you need to take care of

(da)
(db)
(dc)
(dd)

Has the property cleared legal titles?

Is your builder offering a pre launch scheme where the land has still not
even been given a clear NA (non agricultural) title?
(de)
You will need to make legal checks on the history of this land whether
it still holds rights or interests of any third party that could pop up after you buy
the land. Always make sure that you have had look at the ownership of land
papers. It will save you a lot of head-ache at later stage.
(df)
Have you understood your rights for delays?
(dg)
Have you invested in a real estate project 2 years back and havent seen
any development in the property as promised? A lesson to be learnt from this is
that you must understand your rights on delay of construction before you buy
the property.
(dh)
Invest in a construction-linked scheme where a start date and an end date
for construction is given. If possible, maintain a rapport with others buyers so
that in cases of emergency, you have backing in terms of numbers to put
pressure on the developer.
(di)
Is your property being built on reserved land?
(dj)
You might think that developers would never do this. But dont be
surprised if the government comes knocking on the door of your new residence
asking you to evacuate because your house has been constructed on land which
was only reserved for government projects like irrigation of a site of
archeological research. Ensure that the proposed land is clear of such
reservations.
(dk)
Have you checked the operating history of the developer?
(dl)
Are you rushing to buy land in a scheme because it has thrown up some
grand visuals of Venetian villas being built on the banks of a river? Then stop!
Cross check the name and the operating history of your chosen developer.
(dm)
How many projects have they successfully competed in the past? Talk to
some buyers who may have purchased property with that developer. How much
possession of the developers land has been taken successfully? Have they stuck
to their promises of giving facilities in the plotted scheme?
(dn)
How many documents does your developer need to clear and have in
hand?
(do)
There are many documents that you will need to ensure that your
developer has cleared in his files. From the 7/12 document which is the most
critical document of Title and proof of rights to land revenue tax receipts, Title
Deed, Stamp Duty document, Encumbrance certificate, Municipal Corporation
approvals, Release Certificate from the bank, Allotment letter and the
development agreement, the list is quite long. Make sure you have correct legal
advice on the whole gamut of approved documents required.

(dp)
(dq)

Explanation of some real estate documents

(dr)
(ds)
(dt)

Due Diligence
Once the property has been identified, and a price agreed with the seller,
the buyers lawyer will conduct a due diligence or a search of all the
documents related to the property to ensure that there are no deficiencies with
the property that will hinder the proposed sale. In certain geographies, prior to
due diligence the buyer and seller may sign a letter of intent or memorandum of
understanding, accompanied by earnest money or deposit.
(du)
Title: Probably the first and most important thing the lawyer will
check is the title of the seller with respect to the property. It is essential to know
that if the seller does not have perfect title, he cannot transfer the same to the
buyer.
(dv)
For example, if the seller is not listed as the owner of the property, he
cannot sell it. Similarly, if the property is jointly owned by more than one
person, each joint owner would be required to sign the agreement to sell and
sale deed, unless any one of them is authorized to act on behalf of the others by
way of power of attorney.
(dw)
A title search is taken at the office of the local sub-registrar. The buyer
should ask for all title documents (and copies of the same) right from the first
owner of the property or, in the case of property that is extremely old, title
documents thirty years prior to the search. This process can take between 8 and
10 days. The lawyer should also ascertain the survey number, village and
registration district of the property as these details will be required for
registration.
(dx)
Encumbrances: The office of the local sub-registrar would also have to be
searched to see if there are any encumbrances on the property, such as a
mortgage, lien, or claim from a third party. Although mortgaging properties is
not an exceptional practice, one needs to consider the implications of
purchasing a mortgaged property very carefully.
(dy)
In case the seller defaults in paying his debt, the mortgagee usually a
bank can attach the property and sell it to recover the debt, despite the fact
that the mortgagor/seller no longer owns the property. Also, the mortgage deed
might contain a stipulation that the property cannot be sold unless the
mortgagee gives a no objection certificate and in the case of mortgaged
property the buyer must insist that the seller clears the mortgage obtains a NOC
from the bank. Alternatively, the buyer may contract with the seller to make
payment directly to the bank and remove the encumbrance.
(dz)
Property Tax:
(ea)
The lawyer must also check tax receipts for the past three years to
determine whether the seller has paid the requisite property tax to the housing
society or, in the case of independent houses, to the municipal authority.
(eb)
Litigation:
(ec)
It is also essential to ensure that the property is not the subject-matter of
any litigation, as cases pending before the courts can take several years, if not
decades, to be finally decided.
(ed)
Probated Will:
(ee)
In case of property that the seller has inherited, the lawyer must check the
will by way of which the property was acquired. Although Indian law does not
require a will to be probated (i.e, authenticated by a court), this is preferable as
a probate ensures legitimacy of the will and is valid against any claims
thereafter made against the sellers right to inheritance of the property. Although

challenging a probated will is not unheard of, it is extremely difficult for

someone to do so successfully if the will is not fraudulent.
(ef) Buyers rights:
(eg)
To examine all documents of title that the seller possesses or can
produce
(eh)
To be informed of any material defect in the property of which the seller
is aware
(ei) To the execution of a proper conveyance upon payment of purchase price
(ej) To possession of the property as per the agreement of sale
(ek)
A buyer must also release an advertisement in a newspaper stating his
intention to buy the property from the seller, and for our sale properties
TERRAFIRMA will assist with this. This is done so that any objections to the
proposed sale are raised in advance and may be dealt with accordingly. The
objections may bring to light certain hidden facts, such as an encumbrance, or
title defect which might significantly impact a buyers decision to purchase the
property. In case there is a defect in the title, the entire sale can fall through if
not rectified.
(el) Once the buyers lawyer is satisfied that the sellers title is free from defects, he
will issue a title certificate, which is a document stating that the seller has the
necessary title to sell the buyer his property.
(em)
Agreement to Sell
(en)
After the buyers lawyer has issued the title certificate, the sellers
lawyers will draw up a document known as an agreement to sell (in certain
geographies like Mumbai, a deposit may be required from the buyer prior to the
title search and agreement to sell; the buyers lawyers will furnish the exact
details). The agreement to sell will contain the terms and conditions of the sale,
and while there is no standard format for the same, it usually contains the
following vital information:
(eo)
Description/location of the property
(ep)
The purchase price for the property
(eq)
The amount of deposit payable by the buyer usually it would be in the
range of 10% to 20% of the purchase price to be paid in advance
(er)
Date of closing the date on which the purchase price is to be fully paid
to the seller and the sale deed executed and registered by him
(es)
Date on which the buyer will be given possession of the property
(et) The agreement to sell might also contain provisions to deal with breach by
either party e.g. forfeiture of deposit in case of buyers default, or return of
deposit along with interest in case of sellers default an arbitration clause or a
clause specifying the court which would have jurisdiction in case of a dispute,
and provisions for inspection or investigation of title, such as the time in which
this is to be completed.
(eu)
The agreement to sell must be attested by the signatures of at least two
witnesses and must be registered by the sellers lawyers.
(ev)
It is imperative that a buyer not sign any documents unless both he and
his lawyer are satisfied with its contents.
(ew)
Sale Deed
(ex)
When the agreement to sell is duly registered and the purchase price (or a
portion thereof, if so agreed upon), the sellers lawyer will draw up a document
known as a sale deed. This is the document by which the buyer will acquire
ownership of and title to the property.
(ey)
There are certain fees that are required to be paid with respect to the sale

deed. Stamp duty, a levy imposed by the government on certain instruments, is

payable on the property under the Stamp Act of the state in which the property
is located (see box for the applicable stamp duty in various states). The stamp
duty is payable either by printing the sale deed on stamp paper of the
appropriate value or by franking of the sale deed for the value. In case the buyer
has paid the stamp duty and the sale falls through, he would need to apply for a
refund, which could take 4 to 6 months.
(ez)
Like the agreement to sell, the sale deed too is required to be attested by
two witnesses and registered, and the PAN cards of the buyer and the seller will
be required. Registration of the sale deed is carried out by lodging the original
stamped agreement with the relevant registration office. Registering the sale
deed is crucial as the title to the property does not pass to the buyer unless it is
duly registered in accordance with the Registration Act.
(fa)
Please bear in mind that stamp duty and registration fees are two entirely
separate costs, both of which are to be borne by the buyer unless otherwise
agreed between the buyer and the seller.
(fb)
If the property purchased is in a housing society, the buyer would need to
complete certain forms of the society once the property is registered in his
name. Once the forms are submitted the society president will raise the issue in
the next AGM and admit the buyer as a member. In certain cases, a NOC (no
objection certificate) from the society may be required.
(fc) GUIDELINES FOR NRI / PIO / FOREIGN NATIONALS
(fd)
Potential buyers who are not Indian citizens but are resident in India may
still have the legal right to purchase property in India. The Foreign Exchange
Management Act, 1999 (FEMA) regulates the purchase of properties by NonResident Indians (NRI), Persons of Indian Origin (PIO), and foreign citizens.
(fe) The buyer must ensure that the land on which the purchase property is built is
not agricultural land or plantation property, as these types of land can only be
purchased by an agriculturist who is an Indian citizen.
(ff) NRI and PIO
(fg)
The general requirements to obtain a PIO card include holding an Indian
passport at any time, ones parents, grandparents or great grandparents being
born in India or permanent residents of India, or spouse being a citizen of India
or PIO card holder. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal or Bhutan may not hold PIO cards. For more information
and a detailed list of requirements, please visit
http://www.immigrationindia.nic.in/pio_card.htm.
(fh)
An Indian citizen resident outside India or a PIO does not require any
special permission to buy immovable property in India.
(fi) However, no payment of the purchase price can be made in foreign currency.
The buyer make the purchase in rupees through funds received in India through
normal banking channels, or funds maintained in any non-resident account
under FEMA and RBI regulations.
(fj) There are also no restrictions on the number of immovable properties an NRI or
a PIO may purchase for either residential or commercial purposes.
(fk) Foreign Citizens
(fl) A foreign national resident outside India cannot buy immovable property in
India.
(fm)
However, foreign nationals who are resident in India (and who are not
citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, or
Bhutan) can purchase immovable property in India without any special

approval from the RBI. However such buyers should check with their lawyers
before buying any property as they might require approvals from other
authorities such as the State Government, etc.
(fn)
To be considered a resident of India under FEMA, a foreign national
would have to satisfy two conditions: He/she must be residing in India for more
than 182 days during the preceding financial year, and His/her continued
presence in India in the current financial year must be for the purpose of taking
up employment, carrying on business or vocation in India or for any other
purpose that would indicate your intention to stay in India for an uncertain
period
(fo)
Both conditions must necessarily be fulfilled for a foreign national to be
considered a resident of India under FEMA.
(fp)
Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran,
Nepal, or Bhutan who are resident in India can only purchase immovable
property in India with the prior permission of the RBI, who will consider the
request in consultation with the Government of India.
(fq)
For more information, please visit http://www.rbi.org.in
(fr) Repatriation
(fs) An NRI or PIO may repatriate the proceeds from the sale of immovable
property in India on the following conditions:
(ft) The property was purchased by the NRI/PIO in accordance with the provisions
of FEMA in force at the time of the purchase
(fu)
The amount repatriated should not exceed the amount paid for the
property if the property was acquired in foreign exchange remitted through
normal banking channels or out of funds held in an FCNR (B) account
(fv) In the following circumstances, the NRI/PIO may repatriate a maximum of
USD one million per financial year:
(fw)
Out of the balances held in the NRO account if the property was
purchased out of rupee sources
(fx) If the property was acquired by way of gift, the sale proceeds must be credited
to an NRO account, and thereafter may be repatriated
(fy) If the property was inherited from a person resident in India, it may be
repatriated on production of documentary evidence proving inheritance, an
undertaking by the NRI/PIO, and a certificate by a Chartered Accountant in the
formats prescribed by the Central Board of Direct Taxes
(fz) In the case of residential property, repatriation of sale proceeds is restricted to
not more than two such properties.
(ga)
A foreign national may repatriate sale proceeds even if the property was
inherited from a person outside India. However, prior approval of the RBI must
be obtained.
(gb)
A citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and
Iran must seek specific approval from the RBI for repatriation of sale proceeds.

(gc)
(gd)
(ge)
(gf)
(gg)
(gh)
(gi)
(gj)

(gk)
(gl)
(gm)
(gn)
(go)
(gp)
(gq)
(gr)
(gs)
(gt)
(gu)
(gv)
(gw)
(gx)
(gy)
(gz)
(ha)
(hb)
(hc)
(hd)
(he)
(hf)

History land acquisition history in india

The first land acquisition legislation in India was enacted by the British
government in 1824. Called the Bengal Resolution I of 1824, the law applied
to the whole of Bengal province subject to the presidency of Fort William.
The law enabled the government to obtain, at a fair valuation, land or other
immovable property required for roads, canals or other public purposes. In
1850, the British extended the regulation to Calcutta (now Kolkata), through
another legislation, the Act I of 1850, with the object of confirming the title to
lands in Calcutta for public purposes. It was also that time when the British
were building railway lines across the country, and needed some form of
legislation, which would enable them to acquire land for the same. The Act
XLII of 1850 declared that Railways were public works and thus enabled the
provisions of Resolution I of 1824 to be used for acquiring lands for the
construction of railways. Likewise, similar Acts in Bombay (now Mumbai) in
1839, the Building Act XXVII and Act XX of 1852 in Madras (now Chennai)
were passed to facilitate land acquisition in these presidencies (within the
islands of Bombay and Colaba and the Presidency of Fort St. George).
However, it was in 1857 that the British enacted legislation that applied to the
rest of the provinces or presidencies and the whole of British India. Act VI of
1857 repealed all previous enactments relating to acquisition and its object as
stated in its preamble, was to make better provision for the acquisition of land
needed for public purposes within the territories in the possession and under the
governance of The East India Company and for the determination of the amount
for the compensation to be paid for the same. This act, owing to
unsatisfactory settlement, incompetence and corruption was further
amended in 1861 (Act II) and 1863 (Act XXII) and subsequently led to the
enactment of Act X of 1870. The 1870 law, which for the first time, brought a
mechanism for settlement (the reference to a civil court for compensation, if the
collector couldnt settle by agreement), was eventually replaced by the Land
Acquisition Act, 1894 (Act I of 1894). The 1894 law did not apply to princely
states like Hyderabad, Mysore and Travencore, who enacted their own land

acquisition legislation. After India gained independence in 1947, it adopted the

Land Acquisition Act of 1894 by the Indian Independence (Adaptation of
Central Acts and Ordinances) Order in 1948. Since 1947, land acquisition in
India has been done through the British-era act. It was in 1998 that the rural
development ministry initiated the actual process of amending the act. The
Congress-led United Progressive Alliance (UPA) in its first term (2004-09)
sought to amend the act in 2007 introduced a bill in parliament. It was referred
to the standing committee on rural development, and subsequently, cleared by
the group of ministers in December 2008, just ahead of its eventual passage.
The 2007 amendment bill was passed in Lok Sabha as the Land Acquisition
(Amendment) Act, 2009 in February 2009, and the UPA returned to power for
a second term in May that year.However, with the dissolution of the 14th Lok
Sabha soon after, the bill lapsed. The government did not have the required
majority in the Rajya Sabha to pass the bill. The 2007 bill called for a
mandatory social impact assessment (SIA) study in case of large-scale
physical displacements in the process of land acquisition. The act ensured the
eligibility of tribals, forest-dwellers and persons having tenancy rights under the
relevant state laws. As per the bill, while acquiring the land, the government
had to pay for loss or damages caused to the land and standing crops in the
process of acquisition and additionally, the costs of resettlement and
rehabilitation of affected persons or families. This cost or compensation would
be determined by the intended use of the land and as per prevailing market
prices. It also sought to establish the Land Acquisition Compensation Disputes
Settlement Authority at both the state and central levels for the purpose of
providing speedy disposal of disputes relating to land acquisition
compensation. Besides, the bill also proposed that land acquired as per the act
which is unused for a period of five years shall be returned to the appropriate
government. After the UPA came back to power with a bigger mandate, it
sought to reintroduce the bill in 2011 as the Land Acquisition Rehabilitation
and Resettlement Bill, 2011 or LARR, 2011. The bill proposed that for a
private project, land could be acquired only if 80% of the affected families
agree to its acquisition. For a public-private partnership (PPP) project, 70%
affected families must agree. Besides, it proposed compensation for the affected
partiesfour times the market rate in rural areas and two times of the market
rate in urban areas. It also sought to compensate artisans, traders and other
affected parties through a one-time payment, even if they didnt own land in the
area considered for acquisition. The bill was passed inAugust 2013 as The
Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013 and came into effect on 1 January
2014. In May 2014, as the Bharatiya Janata Party-led National Democratic
Alliance (NDA) swept to power, riding high on its development-driven agenda,
it sought to bring about immediate reforms in land acquisition procedures.
Without land acquisition, it argued, the government will find it difficult to
execute its ambitious pet projects, including the Make in India programme,
which seeks to revive and boost domestic manufacturing. Land acquisition is
also central to the governments thrust in infrastructure development. To
facilitate its economic agenda, it promulgated the land acquisition amendment
ordinance in December 2014 with a view to introducing legislation in the
Budget session of parliament. Under the proposed 2015 bill, there will be five
categories which will be exempt from certain provisions of the previous act,
including consent for acquisition. They are: national security and defence
production; rural infrastructure including electrification; affordable housing for
the poor; industrial corridors; and PPP (public private partnership) projects

where the land continues to vest with the central government. These categories
are also exempted from the SIA provisions, as provided for in the 2013 act. The
2013 act facilitated land acquisition by private companies, which the 2015 bill
has changed to private entities. As per its definition, a private entity is an
entity other than a government entity and includes a proprietorship,
partnership, company, corporation, nonprofit organisation, or other entity under
any other law. The 2015 version also removes restrictions on acquisition of
land for private hospitals and private educational institutes.

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PROCESS FLOW DIAGRAM OF LAND USE CONVERSION

Figure 2 adapted and modified: JNNURM RTP

Applicant submits an application for conversion of

agriculture use to non-agriculture use to local body

after the detailed scrutiny, the proposal is placed before

the council for approval

the concil then forwards the proposal to government

through director of town and country planning

after the approval by government, the propasal for

conversion is notified in the gazette, inviting objections
and suggestions

the objections and suggestions, if any received,

scrutinised and final orders for conversion of the land are
issued.

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