Non residents - Why not take benefit of lower deduction of tax at source at the time of sale of your property in India

“Vipul, a Non-Resident Indian was devastated when the buyer of his residential property in India, worth Rs. 6.00 crores, told him that he will deduct income-tax at source under section 195, at the prescribed  rate of 28.496%, amounting to Rs. 1.71 Crore approx. on the entire sale consideration. ”

Whenever, any person being NRI, sells immovable property, to resident Indians, will attract Section 195. For instance, Vipul,  being a Non-Resident Indian wants to sell his property worth Rs.6.00 Crores in April 2021 in India. He was devastated when the buyer told him that he will deduct income-tax at source under section 195; at the prescribed  rate of 28.496%, amounting to Rs. 1.71 Crores approx. on the entire sale consideration.  Total capital gain on his property will be around  Rs.90.00 Lakhs only after taking the valuation and cost inflation index into consideration and the capital gain tax would be around Rs. 18.72 Lakhs only. He will only be able to take a refund after filing his tax return in India by July 2022. Processing of the refund may take another 6 months. Till December 2022, then the refund amount of Rs. 1.52 Crores will remain blocked with the Income-Tax Department. He consulted one of his friends, a Chartered Accountant by profession. His CA friend suggested he apply for  lower TDS or no TDS certificate as per Section 197 of income tax act.

Let’s now discuss about Section 195 and Section 197

Section 195

Any person making payment to non - resident or a foreign company like interest or any other sum (other than salaries) which is chargeable to the income-tax in India, tax at the rates in force shall be deducted at the time of making payment, it will come under the ambit of Section 195.In other words, we can say that whenever any person who is a resident of India, makes any payment to a non-resident person or a foreign company shall be liable to deduct TDS. People mostly tend to get confused with Section 194-IA which is related to selling of the immovable property (other than agricultural land) by the resident of India and TDS is charged at the rate of 1%, if the amount of the consideration exceeds RS. 50.00 Lakhs.

Whenever a non resident / NRI sells his/her property in India, difference between the sale consideration and the acquisition cost is called as Capital Gain and such capital gain is chargeable to the tax rate in force at the time of sale. By the rate in force it means taxes to be deducted at the rate as prescribed under the Finance Act. Tax rate to be charged on the capital gain depends on the holding period of the property. Effective TDS is calculated by adding the capital gain tax, education cess and surcharge, if applicable. If the property is held for less than 24 months, then it will be considered as Short-term capital and any gain/loss arising on it is to be termed as short term capital gain/loss. If the property is held for more than 24 months, then it is considered as Long Term Capital Asset and any gain or loss arising from it is to be called as long term capital gain/loss.

Current Rates for Tax withholding and surcharge on Long term capital gain on sale of property

Section 197

As per the applicable provisions contained in Section 197 of the Income Tax Act, it facilitates taxpayers in granting a nil or lower tax rate for deducting TDS. It is important to note that an application can be made to the Jurisdictional Assessing Officer for issuing the certificate either for deducting tax at the lower rate or at nil rates. On being satisfied, the Assessing Officer can issue a certificate accordingly and it will remain valid till the period mentioned in the certificate or its cancellation, whichever, is earlier. Application is to be made where the seller is assessed.

Procedure for Making an Application

By visiting the tax portal taxpayers can make an application, which is under the head Statements/Forms for obtaining certificate for no or lower deduction of TDS. This form can also be used by the taxpayers covered under Section 206C (relating to Tax Collection/TCS). Application is to be filed online by using Electronic Verification Code (EVC) or Digital Signature Certificate (DSC).

On receiving the application, the Assessing Officer has to calculate the current and estimated tax liability after considering the tax payable during the previous four financial years on the assessed income/returned income /estimated income, as the case may be. Advance tax payment, tax deducted at source (TDS) and tax collected at source (TCS) are also to be considered by the assessing officer. 

 Documents to be attached for obtaining no TDS or Lower rate TDS Certificate

Given below are the broad documents to be attached with the Jurisdictional Assessing Officer for obtaining the certificate:-

1. Application in Form 13

2. Copy of PAN Card

3. Copy of ITRs of three previous years.

4. Copy of Passport

5. Copy of bank statement

6. Copy of affidavit by NRI

7. Copy of Purchase Deed

8. Agreement to Sell

9. Provisional income computation showing tax liability and the capital gain.

If the Assessing officer is satisfied, he may issue the certificate to the taxpayer for No deduction or deduction at lower rate of TDS. The application is supposed to be disposed of in a maximum period of 30 days by the tax authorities.

E-portal for filing complaints regarding tax evasion/Benami Properties/Foreign Undisclosed Assets

“Central Board of Direct Taxes has launched an automated dedicated e-portal on the e-filing website of the Department to receive and process complaints of tax evasion, foreign undisclosed assets as well as complaints regarding benami properties”

Taking another step towards e-governance and encouraging participation of citizen as stakeholders in curbing tax evasion, the Central Board of Direct Taxes has launched an automated dedicated e-portal on the e-filing website of the Department to receive and process complaints of tax evasion, foreign undisclosed assets as well as complaints regarding benami properties

Tax Evasion

Tax Evasion is an activity of evading tax liability by using unfair and illegal means. In simpler words, where an individual, body corporate, company or trusts deliberately tries to reduce the tax liability by treating personal expenses as business expenses, by over-stating the expenses, deductions or stating less income than the income actually earned. It is not limited only to income-tax, but also GST custom duties, etc. It is considered as fraud and criminal offence under federal laws. It attracts penalties and violator risks himself of being prosecuted.

Mostly people got confuse between Tax Avoidance and Tax Evasion; tax avoidance is a legal way of minimizing tax liability within the stipulated provisions of law standards and codes. It uses the loopholes in Tax laws for reducing the tax liability. On the other hand, tax evasion is illegal activity and involves manipulating the statement of affairs in order to minimize the tax liability.

Benami Property

Literal meaning of ‘Benami’ is ‘without any name.’ Benami Property refers to any property whether movable or not, tangible or intangible, which is purchased in the name of a person who is actually not the owner he just holds the property and consideration is paid by the some other person and such person is the real owner of such property. Person who holds such property is known as ‘Benamidar.’ The transaction becomes ‘Benami Transaction’ if the buyer fails to disclose the income at the time of purchase such property becomes ’Benami Property’. For instance, Mr X. buys a property from Mr Y and the consideration is paid by Mr Z. Mr Y only holds the property but Mr Z is the real beneficiary of the property. In the given instance, Mr Y is called as ‘Benamidar.’ In other words we can say that individual purchases the property in other person’s name. Property may be referred to as gold, legal documents, flats, etc. It is important to note that property is not said to be benami if the person is able to disclose the source of income in front of the relevant authorities. Failure to comply with the rules and provisions attracts tax liability, penalties as well as prosecution.

Foreign Undisclosed Assets

Undisclosed asset located outside India means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no satisfactory explanation about the source of investment in such asset or the explanation given by him in the opinion of the Assessing Officer is unsatisfactory.

“Undisclosed foreign income and asset” means the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India.

Procedure for Filing e-Complaint and Income Tax Informants Reward Scheme, 2018

The public can now file a Tax Evasion Petition through a link on the e-filing website of the Department https://www.incometaxindiaefiling.gov.in/ under the head “File complaint of tax evasion/ undisclosed foreign asset/ benami property”. The facility allows for filing of complaints by persons who are existing PAN/Aadhaar holders as well as for persons having no PAN /Aadhaar. After an OTP based validation process (mobile and/or email), the complainant can file complaints in respect of violations of the Income- tax Act, 1961, Black Money (Undisclosed Foreign Assets and Income) Imposition of Tax Act, 1961 and Prevention of Benami Transactions Act (as amended) in three separate forms designed for the purpose.

Upon successful filing of the complaint, the Department will allot a unique number to each complaint and the complainant would be able to view the status of the complaint on the Department’s website. This e-portal is yet another initiative of the Income Tax Department to bring about enhanced ease of interaction with the Department, while strengthening its resolve towards e-governance.

The Central Board of Direct Taxes will give a reward of upto Rs 5 crore to any person who provides specific information about evasion of Income Tax on income and assets in India and abroad. The informants can file complaint on a dedicated e-portal launched by the CBDT earlier this week on its e-filing website.

Under the Income Tax Informants Reward Scheme 2018, the complainant will get upto Rs 1 crore for specific information on Benami property assets, and Rs 5 crore for the tip-off on the tip-off on evasion of income tax. The identity of the informant shall be kept confidential, though furnishing false information or evidence would be considered an offence. 

The quantum of the interim reward shall be one per cent of the fair market value of the immovable property, provisionally attached subject to a maximum of Rs 10 lakh, and the quantum of final reward shall be 5 percent of the aforementioned subject to a maximum of Rs 1 crore, according to a 2018 release by the Income Tax Department. 

It should be noted that furnishing false information/evidence is an offence and a person giving false information/evidence/ statement will be liable to be prosecuted for such offence.

Benefits available under the Income-tax law to senior citizens

Senior citizens can now hope to heave a sigh of relief as far as their income tax returns are involved. Finance Minister Nirmala Sitharaman in the Union Budget 2021-22 announced that senior citizens (above 75 years) with only pension or interest as income will be exempted from filing I-T returns.

The Income-tax Law very well takes care of the senior citizens of the nation by offering them several tax benefits. 

Who qualify to be a senior citizen: Before understanding the age criteria, it is very important to know that the tax benefits offered under the Income-tax Law to a senior citizen/very senior citizen are available only to resident senior citizen and resident very senior citizens. In other words, these benefits are not available to a non-resident even though he may be of higher age. The age and other criteria to qualify as a senior citizen and very senior citizen under the Income-tax Law are as follows:

Criteria for senior citizen:  Must be of the age of 60 years or above but less than 80 year at any time during the respective year. 

Criteria for very senior citizen Must be of the age of 80 years or above at any time during the respective year. Must be resident Must be resident

Following are various benefits offered by the Income-tax Law to senior citizens/ very senior citizens:

1. In respect of tax rates: Senior citizens and a very senior citizen are granted a higher exemption limit as compared to normal tax payers. Exemption limit is the quantum of income up to which a person is not liable to pay tax. The exemption limit granted to senior citizen and very senior citizen for the financial year 2020-21 is as follows: 

 Senior citizen:  senior citizen is granted a higher exemption limit compared to non-senior citizens. The exemption limit for the financial year 2020-21 available to a resident senior citizen is Rs. 3,00,000. The exemption limit for non-senior citizen is Rs. 2,50,000. Thus, it can be observed that an additional benefit of Rs. 50,000 in the form of higher exemption limit is available to a resident senior citizen as compared to normal tax payers.

Very senior citizen: A very senior citizen is granted a higher exemption limit compared to others. The exemption limit for the financial year 2020-21 available to a resident very senior citizen is Rs. 5,00,000. The exemption limit for non-senior citizen is Rs. 2,50,000. Thus, it can be observed that an additional benefit of Rs. 2,50,000 in the form of higher exemption limit is available to a resident very senior citizen as compared to normal tax payers.

2.  Exemption from e-filing of tax return:  From Assessment year 2019-20 onwards, a very senior citizen filing his return of income in Form ITR 1/4 can file his return of income in paper mode, i.e., for him e filing of ITR 1/4 (as the case may be) is not mandatory. However, he may go for e-filing if he wishes.

3. Exemption from paying Advance income tax: As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of "advance tax". However, section 207 gives relief from payment of advance tax to a resident senior citizen.  As per section 207 a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession, is not liable to pay advance tax.

4.Benefits in respect of interest on deposits: Section 80TTB of the Income Tax law gives provisions relating to tax benefits available on account of interest income from deposits with banks or post office or co-operative banks of an amount upto Rs. 50,000 earned by the senior citizen (i.e., an individual of the age of 60 years or above). Interest earned on saving deposits and fixed deposit, both shall be eligible for deduction under this provision. Section 194A of the Income Tax law gives corresponding provisions that no tax shall be deducted at source from payment of interest by bank or post-office or co-operative bank to a senior citizen up to Rs. 50,000. Therefore limit is to be computed for every bank individually.

5.Benefits in respect of expenditure incurred in respect of medical treatment: Section 80DDB of the Income-tax Law gives various provisions relating to tax benefits available on account of expenditure on medical treatment of specified diseases. Section 80DDB covers the details of special benefits under section 80DDB available to a senior citizen. 

6.Benefits in respect of expenditures incurred on account of medical insurance premium and expenditures: Section 80D of the Income-tax Law gives various provisions relating to tax benefits available on account of payment of medical insurance premium and other related items

Tax Payers Charter

The Union Budget 2020 inserted a new section 119A to notify the Taxpayers Charter specifying the taxpayers’ rights and obligations.  It promises to maintain the privacy and confidentiality of income taxpayers and to reduce the cost of compliance with tax laws. It aims for clean and corruption-free governance. The charter lists out the department's commitments towards the income taxpayer as well as what the department expects from the taxpayers. Taxpayers Charter is a bridge building measure between the taxpayer and the income tax department. It defines a taxpayer’s rights and obligations under the law and also specifies the department’s commitment to providing services to the taxpayers. It is expected to bring greater transparency in the tax services and would certainly change the perception of the taxpayers and officials from taxpayers. 

Income Tax department is committed to:

1. Provide fair, courteous, and reasonable treatment : The Department shall provide prompt, courteous, and professional assistance in all dealings with the taxpayer. 

2.  Treat taxpayer as honest : The Department shall treat every taxpayer as honest unless there is a reason to believe otherwise.

3.  Provide mechanism for appeal and review : The Department shall provide fair and impartial appeal and review mechanism. 

4. Provide complete and accurate information : The Department shall provide accurate information for fulfilling compliance obligations under the law. 

5.  Provide timely decisions : The Department shall take decision in every income tax proceeding within the time prescribed under law. 

6. Collect the correct amount of tax : The Department shall collect only the amount due as per the law. 

7. Respect privacy of taxpayer : The Department will follow due process of law and be no more intrusive than necessary in any inquiry, examination, or enforcement action.  

8. Maintain confidentiality : The Department shall not disclose any information provided by taxpayer to the department unless authorized by law. 

9. Hold its authorities accountable : The Department shall hold its authorities accountable for their actions. 

10. Enable representative of choice : The Department shall allow every taxpayer to choose an authorized representative of his choice. 

11. Provide mechanism to lodge complaint : The Department shall provide mechanism for lodging a complaint and prompt disposal thereof. 

12.  Provide a fair & just system : The Department shall provide a fair and impartial system and resolve the tax issues in a time-bound manner.

13.  Publish service standards and report periodically : The Department shall publish standards for service delivery in a periodic manner. 

14.  Reduce cost of compliance : The Department shall duly take into account the cost of compliance when administering tax legislation.

And expects taxpayers to:

1. Be honest and compliant : Taxpayer is expected to honestly disclose full information and fulfil his compliance obligations. 

2. Be informed : Taxpayer is expected to be aware of his compliance obligations under tax law and seek help from the department if needed.

3.  Keep accurate records : Taxpayer is expected to keep accurate records required as per law.  

4. Know what the representative does on his behalf : Taxpayer is expected to know what information and submissions are made by his authorised representative. 

5. Respond in time : Taxpayer is expected to make submissions as per tax law in timely manner. 

6.  Pay in time : Taxpayer is expected to pay the amount due as per law in a timely manner.

Taxpayers can approach the Taxpayers’ Charter Cell under Principal Chief Commissioner of Income tax in each Zone for compliance to this charter. For more Information, visit http://incometaxindia.gov.in

Deed of Apartment - Its Importance and Procedure of Registration - Haryana Apartment Ownership Act 1983 (HAOA 1983)

Nitika Juneja, 58, a retired executive had bought a flat in an upscale condominium in Gurgaon to enjoy a peaceful life after her retirement. When she moved in, she noticed that the builder is not doing proper maintenance as promised and she would have to spend a lot of money on the upkeep of the lobby of the floor where her flat was, since the lobby was in a very run down condition which could be very embarrassing when her friends or relatives visit. The lobby was directly connected to the entrance of her flat but was part of the common area which was supposed to be maintained by the society’s management body since she has been paying the maintenance charges regularly as fixed by the society. She followed it up many times with the society’s office bearers but yielded no results. A friend advised her to raise the issue in the member’s general meeting along with a few other members. On the day of the meeting, she reached the venue with 25 other flat owners of the society who were facing similar problems. They all were not allowed to enter the meeting venue on the pretext that their deed of apartment has either not been executed or not submitted to the Estate Office of the condominium as required under the Haryana Apartment Ownership Act 1983. 

Section 5 (2) of the Haryana Apartment Ownership Act 1983, makes it mandatory for the apartment owner(s) to execute the Deed of Apartment to claim ‘ownership’ of their apartment.  Deed of Apartment is also mandatory from Voting Rights perspective and as per the Public Notice issued by Director Town & Country Planning. Any person using property or any part thereof shall be subject to this Act, the declarations and bye-laws to the provisions of this Act.

Deed of Apartment is to be signed in the presence of a Magistrate, sub registrar or any other person competent to administer the oath. Registration of the deed of an apartment is compulsory in nature. It Provides greater transparency; Safeguards the interest of apartment owners; is a Conclusive evidence of lawful ownership ; Easily identify its allocated area along with appurtenant percentage of  undivided interest in common areas and facilities ; Prevents fraudulent practices and forgeries; litigations and encumbrances if any.

Conveyance Deed of property is for ownership of the property. The Haryana Apartment Ownership Act 1983 and Rules, only recognizes the Deed of Apartment as the document that secures your title to the apartment. This is particularly applicable for Apartments in group housing colonies. Even if a Conveyance Deed, is there but one must get the Deed of Apartment executed. Each apartment together with its undivided interest in the common areas and facilities, appurtenant to such apartment, shall for all purposes constitute heritable and transferable immovable property within the meaning of any law for the time being in force in the State of Haryana.

Deed of Apartment shall include the description of land or postal address of the property, including other details like the number,  page and date of executing declaration  and the date and serial number of its registration under the Indian Registration Act, 1908, as the case may be and other references, if any of its filing with any other competent authority; Apartment’s number and other necessary details for identifying the apartment; Apartment’s statement of use, for which apartment is acquired and restriction on its use; Common areas and facilities forming part of the apartment as per the percentage of undivided interest appertaining  to the apartment; and any other details as required in consistent with the act.

The deed of apartment can be executed only after the Deed of Declaration has been filed by builders of the property to the authorities, which define the common areas and the owner’s share of rights in those common areas. Therefore, Deed of Declaration is a prerequisite to execute the Deed of Apartment.

The provisions of this Act shall apply to every apartment lawfully constructed for residential purposes for the purpose of transfer of ownership of an individual apartment in a building whether constructed before or after the commencement of this Act. The owner/builder/developer of such property/building shall duly execute and get registered a declaration within a period of ninety days after obtaining part completion/completion certificate under the rules framed.

Any property developer / builder who fails to file deed of declaration within the stipulated time as mentioned under section 2 of this Act, shall be punishable with imprisonment of either description for a term which may extend up to three years and shall also be liable for fine of not less than Rupees Fifty Thousand and fine of Rupees Ten Thousand per day if offence continues. 

Grievance Redressal Mechanism Under Income-Tax Act

Central Processing Centre (CPC) of Income Tax Department, has a Grievance handling team to address queries of taxpayers and the following services are categorised on the basis of nature of queries:

1. E-Nivaran Grievance

Introduced  for handling queries of taxpayers related to Income Tax Return Filing via e-Filing Portal. All the grievances are taken note of and assigned to executives and then categorised and sub-categorised accordingly at CPC for the proper and timely resolution. Once it is approved by ITD officer, e-mail is received by the taxpayer and same along with resolution gets updated on the e-filing portal under the head ‘MY Account’. Rejected cases are sent back for re-analyzing.

1. Centralized Public Grievance Redress And Monitoring System (CPGRAMS)

It provides multiple channels through which taxpayers can get in touch with the department. Any citizen of India can raise their grievance or pleas to the Central Government and State Government- Departments and Ministries. There is a dedicated team under CPC for closely monitoring all CPGRAMS grievances and ensuring timely and accurate disposal of such grievances. Before disposing of any grievance all the resolutions provided by CPGRAMS are reviewed by Designated ITD Officer in the Public Grievance Portal.

1. Income Tax Business Application (ITBA)

Introduced  for all the basic application and work of officers. Assessing Officers raise their enquiries and complaints with respect to CPC processes by lodgings tickets and then, these lodging tickets are routed to their respective teams by the Assessing Officer. Special Portal has been built through which all ITBA Tickets are noted down, accounted and assigned to respective executives. Once tickets are resolved by the executives. 

1. Online Reputation Management (ORM)

Introduced for redressing the grievances posted on the social media by the taxpayers and all the cases are directly monitored by CBDT Income Tax Department. ORM Team is built for assigning cases to the executives for the proper resolution.

E-Mail to CPC

Specific queries from taxpayers or their representatives are handled by using e-mail Id for resolving the grievances.

Grievance Redressal Mechanism under is twofold- where ASK (Aaykar Seva Kendra) is not functional and ASK (Aaykar Seva Kendra) is functional

1. Where ASK (Aaykar Seva Kendra) is not functional

Grievances arise because of enormous reasons such as delay in transferring files, harassment during a search, delayed hearing etc. Grievance redressal is largely a public relation exercise. In order to provide ease to assesses, Grievance Redressal Mechanism is provided with objectives as given below:

1. Immediate redressal of public grievances

2. Protecting the right and dignity of taxpayers

3. To make sure that higher standards of accountability are maintained by officers and staff of the department. This is done by taking disciplinary actions against erring persons wherever necessary.

4. Improving system working through a proper feedback loop from the public with respect to the working of the department.

5. Acquiring better knowledge about officers/ staff and using that knowledge to better serve the public.

6. Improving vigilance working by using public grievance as input.

Procedure for dealing with Grievance Petition

Upon receipt the original petition is sent to the respective Grievance Cell and allotted a running number to the received grievance. The officer receiving the grievance shall keep a copy of the grievance and act on it. On the basis of action taken, a compliance report has to be sent to the grievance cell as per protocol.  All grievances have to be addressed within a reasonable time frame. If it is not possible to help the petitioner, the same should be informed accordingly and timely.

All grievances must be pursued till closure and the redressal officer must report compliance within a specified period of time. The Commissioner/ Chief Commissioner should analyze grievances and take systematic measures to prevent recurrence of grievances. Action may be taken against delinquent officers if necessary.

Maintenance of registers and reports: Every grievance cell and assessing officer has to maintain a grievance register.

1. Where ASK (Aaykar Seva Kendra) is functional

Where ASK is functional, well-designed software (i) registers the grievances of taxpayers; (ii) allots unique numbers and (iii) transfers the grievances to respective sections for resolution and (iv) keeps track of such grievances. With the software, there is no need to keep manual registers for keeping the record of grievances.

CBDT is committed to meet all standards as below:

1. Identify complaints prone areas and determine time norms for their redressal

2. Provide information about the complaint handling process clearly and accessible to all.

3. Publicize information about the complaint handling process.

4. Identify complaints uniquely and record necessary information

5. Scrutinizing complaints individually.

6. Acknowledge each complaint promptly and give a unique complaint number along with expected redressal time and details of employee for further correspondence.

7. Investigating complaints thoroughly and effectively resolving it.

8. Conveying the resolution to the complainant. In case resolution is not satisfactory; justification for decision taken along with alternative recourse shall be communicated to the complainant.

9. Ombudsmen have been appointed by the Government of India for looking into the grievances of taxpayers if normal delivery mechanism does not respond.

Post Covid 19 - How residential prices will rise in the next 2 years and silver lining for old home loan borrowers

As per leading English daily ET “In the wake of the pandemic, many companies have mentioned that their employees would continue to work from home until June 2021.  Consequently, home buyers are looking to buy properties that are not only more spacious but also located in less populated areas, irrespective of their distance from the workplace. The Covid-19 outbreak has triggered the demand in the outskirts of cities like Bangalore, Chennai,, Delhi-NCR and Pune as working professionals need a home that can accommodate workstations along with a study room for kids.”

 Further “If early signs are anything to go by, real estate is one sector that is going to be the hottest theme of Calendar 2021. In fact, it may also give a new lease of life to some other sectors that depend on it. Macro data and early numbers reported by the real estate companies suggest a recovery is on the cards. Encouraged by lower property prices, cheaper loans and encouragement from the government authorities, demand has picked up.”

 Will the trend continue? Going by the signals the market is sending out and management commentaries, the answer is in affirmative.

As per ET reports, the Covid-19 pandemic has also accelerated demand for houses in tier II and III cities due to reverse migration, availability of better value-based pricing,  better returns, larger spaces, and lower cost of construction. Leading developers like DLF, Emami Realty, ATS, Omaxe and Alpha Corp have shifted focus towards smaller cities to monetise the land banks they had held for long.

Indian investors in the housing sector who are on older loans and  mortgages, are being advised that simply switching to a better rate could see them save huge money over the life of a loan. A significant number of  home loan borrowers have not switched lenders for several years, yet they stand to save so much money by doing so.

 Why? The experts report highlights that  borrowers could save money by asking for  a lesser rate from their current  lender/bank or shifting to a new bank.

“There are obstacles in the way of home loan borrowers shifting lenders, such as a lack of transparent lending rate, as well as inconvenience and time costs, still  switching will be worth the effort. Our recommended prompt would clearly set out for many borrowers just how much higher their interest rate is compared to new borrowers.  This information would be a huge savings  for borrowers to seek a lower rate from their current lender or to shift over  to a new lender.

 It would also encourage banks  to offer their existing borrowers better rates, promoting greater competition in the sector. As loans age, the difference between the rates paid on older loans as compared with new loans increase. Borrowers with loans more than 10 -12  years old were, on average, paying many basis points more than the average interest rate paid for new loans.

 If you are a borrower of older  home loans,  you would be surprised to know that borrowers with new loans are likely walking into the very same lending institute/ bank,  you have your loan with and getting much much  lower interest rates.

Who has the right to attend Special/ Annual /General Body Meetings – Haryana Registration and Regulation of Societies Act 2012

(HRRS Act 2012 - With reference to housing societies condominiums and complex)

Samuel, a business analyst in a company in Mumbai was visiting his brother who was staying in a posh condo in Gurgaon owned by his brother. The day he reached there happened to be a Sunday and perchance the day when the resident welfare society had scheduled a general body meeting to discuss important business relating to the complex in which his brother David was staying for last two years. After the breakfast, David asked his brother also to accompany him in the meeting within the same complex. It was to great surprise of David that the staff at the entry gate politely told him that since Samuel was not the owner, cannot be allowed entry. It was not in the knowledge of David that such meetings are only meant for the registered owners who fall within the definition of ‘Member’ of the Society. But since both the brothers were well educated they understood the legal position and Samuel came back home while David attended the meeting, which was important as far as the agenda was concerned.

Immediately thereafter, came Dr. Upadhyay with his wife Kirti, son and daughter in law, Kirti’s brother and his wife where the flats were in every couple joint names. On being objected by the staff at the entry gate, all of them became highly rude with the staff. They were politely told that in each case only the first named owner was allowed in view of the settled law in this respect. But unfortunately, none of them budged and they all made their way inside. Once the meeting started, each one of them made noise on issues and disrupted the entire meeting (probably that was their main aim to come in numbers). As a result, the meeting could not be conducted properly. This happened despite the fact that Dr. Upadhyay and their immediate family was quite educated and residing in the complex for many years and well aware of societies' rules and procedures. There were many other such cases that day and the staff had a tough time to make everyone understand the purpose and procedure of this exercise and importance from the point of view of the bonafide residents and members of the society.

The dissimilarity of proper understanding in the cases above can be clearly made out. Let us study what is the real law in this respect.

Under the Haryana Registration and Regulation of Societies Act, 2012 (Act), it has always been a subject of debate within the society and condominiums weather a joint owner of the property is eligible to attend the general body meetings of the Residents Welfare Association (RWA). It has been observed that lot of disputes in a Society pertain to this, especially at the time of conducting meetings when non-members and joint owners (and sometimes the parents, brothers, sisters and even in-laws etc. of the first named member) force their way in to attend such meetings with wrongful intentions.

As per the above Act and in common parlance, the person who owns a flat in a society/condominium will be considered member, provided his name stands first in the deed of registration as registered with the sub-registrar of the relevant office/tehsil. As per the act and rules of the societies and based upon the number of decided case laws, only the members of a society are eligible to vote in any of the general meetings of the society. Therefore, the invitation is given only to the members of the society to attend such meetings and vote on any business as per the agenda items.

Further, where an apartment has been allotted in favor of one, two or more persons jointly, they may be jointly entitled to the ownership of the apartment and the share certificate of the Association in such case may be issued in their joint names. However, the person whose name stands first in the share certificate shall have the right to vote, provided that such person, whose name stands first in the share certificate, may transfer such right to vote for a particular meeting only to any one of the other joint owners for which a twenty-four or forty-eight hours advance written information to the society, is made a pre-requirement in the bye-laws of the society or at the time of issuance of such notice.

It’s the duty of the society right at the time of admission of member to go through the title deeds and ownership papers while issuing the share certificate to the members of the society to ascertain that the names to be mentioned in the share certificate are in accordance with the title and ownership papers of the property like conveyance deed etc. duly registered in the office of the sub-registrar having relevant jurisdiction.

According to the clarification issued by the State Government in this respect, “In case of joint ownership, only the first owner is eligible to contest the election as per the original title deed of property papers registered by the office of Sub Registrar”. Therefore it is the intent of the legislature and lawmakers that the first named person only has a right to attend the general body meetings of the society. It further clarifies that the first owner can authorize the joint or the 2nd owner to cast vote after getting NOC from the first owner at the relevant time, if required, on the business of the said meeting. The Act, therefore, permits the second or the joint owner only for the purpose of casting vote on the business of the meeting, when the first named owner is finding difficult to attend the meeting and information in the prescribed format and within the prescribed time has been sent to the society.

Also in case of membership in joint names, only the member who stands first in order of the joint names shall be eligible to vote in the meeting and not any other co-member or joint owner. It is clearly mentioned that a non-member should not be allowed to attend the meeting of members of the society.

Sometimes it is argued that passive member will sit separately in the meeting or behind in a separate area and that the governing body should allow them on humanitarian grounds, but the legal position is very clear that meeting of members should be such, in which others are not able to disturb or disrupt or influence in any way whatsoever. Under all circumstances, it should be an independent meeting of members. The only person who could attend as a non-member is the representative from the office of the District Registrar or the Auditors or any other person invited by the society for a specific purpose of the business of the society or for imparting certain information to the members.

It is relevant to refer here the “Certificate of Registration” which is issued under Section 9(1) of the Haryana Registration and Regulation of Societies Act, 2012 at the time of registration of the society by Department of Industries & Commerce, Haryana in form III under rule 5 and 6 of HRRS Rules 2012 where the notes are provided for Some Important Provisions of The HRRS Act 2012 to be followed by the societies. This states: “In the case of Joint Apartment owners, the 1st owner will be eligible to contest the elections”. The Act vide definition of a member as per subsection (xv) of section 2 defines “member” as a person who fulfills the eligibility criteria for becoming a member of a Society, as specified in the Act and has been admitted as a member of the Society in accordance with its Bye-laws. This also clearly speaks about the intent of lawmakers.

In the case of any violation or unruly activity by non-members, any member of the society can make a verbal or written objection and the Chairman / President of the meeting is responsible to see that the proceedings go on uninterrupted in a lawful manner and also record the same properly in the minutes and proceedings. Non-members cannot and have no locus stand in such meetings and the society has all the rights to sue such individuals who try to force their way into the general body meetings of the members. All such complaints should be addressed to the District Registrar and to the law enforcement agencies including the Police department.

The Haryana Registration and Regulation of Societies Act, 2012 (HRRS Act, 2012) - Formation, Interpretation and Importance of Bye-laws of a society (Haryana Act No. 1 of 2012)

The lack of clear coverage and absence of an appropriate understanding of Bye-laws, more often than not, leads to disputes and filing of a number of court cases. Amongst these, the disputes relating to memberships and the elections of societies are in the forefront. Since the membership of certain societies is very large, contested claims and counter-claims, accusations on account of false memberships etc. often lead to election related disputes. The scale and increase in number of the members makes it complicated to ensure involvement of members in the process of decision making. It is therefore, very important that proper Bye-laws are formulated by the society as per the act, rules and model bye-laws as per the intent of the legislature.

The Foreword of the HRRS Act 2012 (Act), the Statement of Objects and Reasons accompanying the Bill throws light on the objective of the Legislature in its enactment as below:

"At present, the law relating to the Societies and their registration is governed by the Societies Registration Act, 1860 (Central Act 21of 1860) in its application to the State of Haryana. The Societies Registration Act, 1860, being a 19th Century legislation, has become outdated and found to be deficient in addressing the present day requirement. As such, need has been felt for framing a comprehensive legislation with regard to the registration and regulation of Societies to meet the present day requirement.

The inadequacies of existing legislation and absence of a comprehensive regulatory framework has led to a number of disputes and filing of a number of court cases. Disputes relating to memberships and the elections of societies are in the forefront. It has been observed that the membership of certain societies is very large, generating contested claims and counter-claims, involving allegation of bogus memberships, which in turn often lead to election related disputes. The enormity and spread of the members makes it difficult to ensure participation of members in the process of decision making.

Keeping in view that the scope of activities covered by various Societies registered under the 1860 Act is very large and the stakeholders belong to all sections of Society, it has become imperative to make provisions for effective regulation of the societies and simplify the provisions to minimise the scope of any ambiguity. This bill provides for summary settlement of membership and election related disputes which take a very long time in courts. It provides for vesting of properties in the Society itself rather than the Governing Body as per existing Section 5 of the 1860 Act and which could be misused by an office-bearer for personal use. The Act forbids employment of a member or dependent in the society and division of profits among the members except in case of housing societies. It introduces the concept of electoral colleges and constitution of a Collegium as an intermediate body to address the problems of societies with large memberships and to ensure and enable participative decision making. The Bill seeks to establish a regulatory framework with the objective to provide clear guidelines for smooth administration and management of the affairs of the Societies registered under this Act in the State of Haryana."

From the above, it is clear that one of the objectives of the Act was to provide for summary settlement of membership and election related 14 of 22 disputes which take a very long time in courts. The Preamble of the Act states that it is an Act to consolidate the law relating to the registration and regulation of Societies in the State of Haryana, promoting art, fine arts, charity, craft, culture, education, literature, philosophy, political education, religion, sports, science, any public or charitable purpose and for matters connected therewith or incidental thereto'. Section 89 bars the jurisdiction of the Civil Court to entertain or proceed with a suit or to settle, decide or deal with any matter which under the Act is required to be settled, decided or dealt with by an authority under the Act.

Thus, the management and administration of a Society entirely depends on its carefully drafted Bye-laws strictly within the ambit and provisions of the act. Any provision in the Bye-laws of any society which is not in line and intent of the provisions of the Act would be dealt with as prescribed in the Act and it can in no way supersede the provisions of the Act and its rules.

As per section 2 of the Act, Bye-laws means the Bye-laws of a Society and anyone who fulfils the eligibility criteria for becoming a member of a Society, as specified in the Act and has been admitted as a member of the Society in accordance with its Bye-laws comes under the definition of member. The Bye-laws are required to be signed by the signatories to the Memorandum of the society. Every member shall subscribe to and be bound by the Bye-laws as amended, from time to time and duly registered with the District Registrar.

The Bye-laws shall generally conform to the model Bye-laws as prescribed and shall contain provisions in respect of the following matters:-

(i) Identity which includes name and address of the Society; (ii) Aims and objects of the Society; (iii) Provisions regulating the membership of the Society i.e. eligibility, admission, kinds of membership, membership fee, subscription fee, resignation, withdrawal and termination etc.; (iv) the composition of the General Body, its powers functions, periodicity of its meetings, quorum, period of notice for meetings, manner of voting, record of proceedings etc.; (v) principles of formation of electoral colleges, constitution of Collegium, manner and mode of election for a member of the Collegium, resignation, removal, the term of office of the member, powers, functions, procedure and periodicity of holding the meetings of the Collegium, quorum, period of notice for meetings, manner of voting, record of proceedings etc.; (vi) composition of Governing Body, the manner and mode of election or appointment, resignation or removal, the term of office of the office bearers, its powers, functions and duties, procedure and periodicity of holding the meetings, quorum, period of notice for meetings and manner of voting, record of proceedings etc.; (vii) Procedure for amendment in the Bye-laws; (viii) Procedure regarding amalgamation, division and dissolution; (ix) sources of finance including the types of funds to be raised, maintenance of accounts, inspection of accounts and its audit, appointment of auditor, liability of member for discharge of debts etc.; (x) Provisions regarding the safe custody of the property or assets of the Society, particularly mentioning the manner of keeping or investing any money of the Society; and (xi) Any other matter relating to the affairs of the Society, as may be required.

A Society may include or exclude such provisions in its Bye-laws as required keeping in view the nature and scope of its activities and operations, and which may or may not find a mention in the model Bye-laws subject to the condition that such additions or omissions are not inconsistent with the provisions of the Act and rules.

Attention is also invited to the proviso of section 6 of the Act titled ‘aims and objects’ which states “provided that no society shall be registered under the act unless it prohibits the payment of any dividend or distribution of of any assets, income or profits to its members or their dependents or legal heirs except where a society has been formed or established by the contributions of shareholders or members in the nature of a housing society or a welfare association of flats or tenement or floor space owners pursuant to the requirements laid down under the Haryana Apartment Ownership Act, 1983 ( Act No. 10 of 1983 ) or a resident welfare association for the operation, management and maintenance of facilities for the residents or civic amenities of any defined area”.

It is important to note again that this Act is only to consolidate the law relating to the registration and regulation of societies in the state of Haryana promoting the above described activities whereas The Haryana Apartment Ownership Act, 1983 ( HAOA 1983 ) is an Act  to provide the ownership of an individual apartment in a building and to make such apartment heritable and transferable property and matters connected therewith. 

This is precisely the reason that Specimen Model bye-laws of society in clause 3 of Annexure -5 of the HRRS Act 2012 clearly state “the housing complex (name) is submitted to the provisions of the Act and the rules made under The Haryana Apartment Ownership Act, 1983”.

Therefore, for the purpose of law relating to registration and regulation of Societies in the state of Haryana, the HRRS Act 2012 is applicable and for the purpose of matters relating to apartment ownership, rights and obligations, HAOA 1983 is applicable.

The contents of the Memorandum and the Bye-laws are to be prepared in accordance with the provisions contained in sections 24 and 25 of the Act. The Society is under obligation to follow the model memorandum and the Bye-laws set out in Appendix-I, II and III of HRRS rules 2012. It may be noted that there is very limited scope not to follow the model bye-laws since they are part of the rules vide part III which prescribe Model Memorandum of Association and Model Bye-laws of Societies in the state vide Annexure-1 To Annexure-5

Every existing Society must apply in the prescribed proforma to the District Registrar for obtaining a new registration number within a period of two years further extended period notified by the Government. If the new registration number is not applied within two years as mentioned above, then the application for the new registration number shall be made along with such fee, as may be prescribed, within such extended period, as notified by the Government. If a Society fails to move an application for the new registration number even within such extended period, the registration may be cancelled.

The Application for allotment of new registration number by an existing Society under Section 9(4) of the Haryana Registration and Regulation of Societies Act, 2012 vide sub-rule (1) of rule is made in Form – VI where the applicant society has to certify that the memorandum and the Bye-laws of the Society, as being presented, are confirming to the provisions of the Haryana Registration and Regulation of Societies Act, 2012 and the rules made there under.

A Society may, by a special resolution passed in a general meeting of the Association by 3/5th of the members present and voting amend the provisions of its Memorandum or bye-laws with respect to:

(i) Change in the name of Society; or (ii) Change in the aims and objects of the Society, as permissible under the Act.

“Special Resolution” means a resolution passed in a meeting of the General Body or the Collegium, as the case may be, in which at least forty per cent of the members entitled to vote are present and the resolution is approved by three-fifth of the members so present and voting. The relaxation of 25% and 15% as given below for the quorum of General Body Meetings is not applicable in the meetings where Bye-laws of the society are adopted.

It may be noted that the quorum for other meetings of the General Body/Collegium is minimum 40% of the total members of the Society. In case the minimum stipulated quorum is not present in the meeting of the General Body/Collegium so convened, the meeting shall be adjourned to another date of which a proper notice shall be issued. The quorum for a meeting adjourned on this account shall be not less than 25% of the members entitled to vote and present in person, subject to a minimum of four. Further, in case such meeting is adjourned for a second time for want of the quorum of 25%, the quorum for such adjourned meeting shall be 15% of the members entitled to vote and present in person subject to a minimum of four.

An Application for amendment in the Memorandum and By-laws of the Society under section 26(3) of the Haryana Registration and Regulation of Societies Act, 2012 (sub-rule (2) of rule 17) is made in Form – XVI. In case of any inconsistency between the Bye-laws and the provisions of the Acts, the provisions of the Acts will apply.

Any special resolution passed shall be filed with the District Registrar within thirty days from the date of approval thereof and the District Registrar may, if he is satisfied that the same is in accordance with the provisions of the Act and the rules, register such change. Any such change shall have no effect until it has been so registered.

If the District Registrar refuses to register a change in the Memorandum or the Bye-laws he shall communicate the reasons there of in writing within a period of sixty days of filing of the special resolution by the Society, and the special resolution passed by the Society in that case shall have no effect. If the District Registrar fails to communicate the reasons within sixty days, the special resolution shall be deemed to have been registered by him.

If the Registrar, on a report from the District Registrar or otherwise, considers that an amendment of the Memorandum or Bye-laws is necessary or desirable to bring the same in conformity with the provisions of the Act or rules made there under, he may, by an order in writing, direct the Society to make such amendment within such time, as may be specified, in such order. The Governing Body shall place such directions before the General Body for its consideration and approval within forty five days of the receipt of such directions. If the Society fails to make any such amendment within specified time, the Registrar, after giving the Society an opportunity to state its objections, if any, register such amendment to the Memorandum or the Bye-laws and send a certified copy thereof to the Society. Such amendment to the Memorandum or Bye-laws, as the case may be, shall be final and binding on the Society and its members.

Every Society is under obligation to deliver, on demand a copy of its Memorandum and the Bye-laws to a member at the time of admission.

If any office bearer, knowingly or willingly, makes a false return or furnishes false information or willfully or without any reasonable reason, disobeys any summons, requisition, or other lawful order or direction issued under the provisions of the Act or withholds or fails to furnish any information lawfully required from him by the District Registrar, Registrar or Registrar General or person authorised in this behalf under the provisions of the Act, shall be punishable with fine which may extend to five thousand rupees, and in the case of a continuing default or contravention, with fine which may extend to one hundred rupees for every day during which the default or contravention continues.

Where a member is unable to attend the meeting in person, he may communicate his concurrence or reservation to the amendment to the memorandum or the Bye-laws, as the case may be, by electronic means or letter at least one day prior to the date of the meeting, which shall be read out by the Secretary in the meeting.

-         sunil@sunilkumarjain.com

Haryana Registration and Regulation of Societies Act, 2012 (HRRS ACT 2012) – whether a joint owner is eligible to vote or contest election

Under the Haryana Registration and Regulation of Societies Act, 2012 (Act), it has always been a subject of debate within the society or condominium weather a joint owner of the property is eligible to vote or contest election of the Residents Welfare Association (RWA). It has been observed that the maximum number of disputes in a Society pertain to memberships especially at the time of elections.

As per the act where an apartment has been allotted in favour of two or more persons jointly, they may be jointly entitled to the ownership of the apartment and the share of the Association in such case may be issued in their joint names. However, the person whose name stands first in the share certificate shall have the right to vote; provided that such person, whose name stands first in the share certificate, may transfer such right of vote to any one of the other joint owners.

It’s the duty of the society right at the time of admission of member to go through the title deeds and ownership papers while issuing the share certificate to the members of the society to ascertain that the names to be mentioned in the share certificate are in accordance with the title and ownership papers of the property like conveyance deed etc. duly registered in the office of the sub registrar having relevant jurisdiction.

According to the clarification issued by the state government in this respect “In case of joint ownership only the first owner is eligible to contest election as per the original title deed of property papers registered by the office of sub Registrar”. It further clarifies that the first owner can authorize the joint or the 2nd owner to cast vote after getting NOC from first owner. The Act permits the second or the joint owner only for the purpose of casting vote and not for contesting the election.

It is relevant to refer here the “Certificate of Registration which is issued under Section 9(1) of the Haryana Registration and Regulation of Societies Act, 2012” at the time of registration of the society by Department of Industries & Commerce, Haryana in form III under rule 5 and 6 of HRRS Rules 2012 where the notes are provided for Some Important Provisions of The HRRS Act 2012 to be followed by the societies. This states “In case of Joint Apartment owners, 1st owner will be eligible to contest the elections”. The act vide definition of a member as per sub section (xv) of section 2 define “member” means a person who fulfills the eligibility criteria for becoming a member of a Society, as specified in the Act and has been admitted as a member of the Society in accordance with its Bye-laws;

Section 25(i) of the Act states that “The Bye-laws shall generally conform to the model Bye-laws as prescribed and shall contain provisions regulating the membership of the Society i.e. eligibility, admission, kinds of membership, membership fee, subscription fee, resignation, withdrawal and termination etc.

Part III of the HRRS Rules 2012 prescribes the Model Memorandum of Association and Model Bye Laws of the societies.

Annexure -2 of above rules provide Explanatory notes for the Contents of the ‘Bye-laws’ of a Society. vide S.No. 2 it states that Sections 14 to 23 of the Act may be carefully read while framing the bye-laws in this behalf. It has been observed that the maximum number of disputes in a Society pertain to memberships. The bye-laws must address the issues of the maximum number of members it would like to fix for the Society, types of membership, the fees for each type of membership, the manner and the process of admitting a person as a member, cessation of membership etc. Further, all particulars of a person admitted as a member, such as Name, Father’s name, address (both correspondence and permanent address), contact details (such as telephone number, email ID), caste or community (if the bye-laws of a Society so restrict), may be obtained for ease of establishment of identity as well as timely communications.

The Haryana Apartment Ownership Rules, 1987 also prescribe rules as regards Joint apartment owners. It states where an apartment has been purchased by two or more persons jointly, they shall be jointly entitled to the apartment and the shares of the Association shall be issued in their joint names, but the person whose name stands first in the share certificate shall alone have the right to vote.

It is therefore required of a society to draft the bye-laws carefully so as to minimize the disputes in this regard.

- sunil@sunilkumarjain.com