At some point in time you have given your property on rent or have rented a property but why rent or lease agreement is only for 11 months in India?
Let us see!
If you are an Indian, then you must have done some “jugaad” in your lifetime. If you don’t know what jugaad is, then let me explain it to you first. Jugaad is simply finding a low-cost solution to any problem in an intelligent way.
Registration Act 1908 – Rent or Lease Agreement:
In India, whenever you rent a house or any property or give your property on rent, then you have to do an agreement with the concerned party, known as “Rent Agreement or Lease Agreement”.
In Indian Constitution, there is a law regarding rent agreement known as Registration Act 1908.
According to this law, if you give your property on rent for 12 months or more, then it is mandatory for you to get a certificate, issued by the Government of India. For this, you have to pay stamp duty and registration fees to the government.
I am providing you with some of the sections of this Registration Act. You can read the complete act from here.
Section 17: Documents of which registration is compulsory.
(d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent.
Section 18: Documents of which registration is optional.
(d) leases of immovable property for any term not exceeding one year, and leases exempted under section 17.
Why is rent or lease agreement only for 11 months?
Until now you have might have guessed the reason.
Yes, you are right. The simple reason is that nobody wants to pay fees to the government for giving a property for rent.
Now, if you rent your house for 12 months or more than that, then you have to pay fees to the government.
People find jugaad to solve this problem. They thought that if you rent something for 11 months or less, then it is not mandatory to pay taxes to the government.
Thus, with mutual understanding between the owner and tenant (किरायेदार), the renewal process is after every 11 months rather than 12 months or more.
This way they avoid paying stamp duty and other charges to the government.
Both parties get the document notarized in just ₹300 to ₹400 and after that, you can rent a property or give your property for rent. (The amount might differ depending on the area you live in.)
(A notary (विपत्र प्रमाणक) is simply a government official who has the legal authority to say and declare that documents are correctly signed.)
How much Stamp Duty and Registration Charges you have to pay to the government?
In case, if you are required to pay fees to the government, then it differs from state to state.
Stamp duty is a state subject. That’s why all states have different rates and laws dealing with stamp duty.
For example in Madhya Pradesh, stamp duty is around 8%.
I hope now you have understood the reason behind rent or lease agreement of only 11 months. Share this with your friends and family members and let them also know about this fact.