New Delhi, March 12: A government panel has recommended mandatory registration of all lease agreements and power of attorney documents to ensure revenue augmentation.
At present, only lease agreements for a year and more need to be compulsorily registered. Registration of power of attorney documents is optional.
If the proposal is accepted, it will mean that some of the ubiquitous 11-month rent agreements will lose their sheen. Some landlords prefer the 11-month tenure as registration is not mandatory, which helps them escape paying tax on the rent.
However, the new proposal covers only lease agreements as of now, not leave and licence agreements that are more popular since they do not vest property rights and make eviction easier.
The committee, set up by the rural development ministry’s department of land resources, has recommended several amendments to the 105-year-old Registration Act.
Under one proposed amendment, a person renting out a house or a shop or any other immovable asset will have to compulsorily register the agreement (see chart).
Right now, agreements for less than a year are sealed on stamp papers and are not registered with the relevant authority. These documents are legally valid but the government loses out on revenue if the owner accepts rent in cash and does not show it as income.
“Currently, owners are entering into 11-month agreements with tenants to avoid registration. Such documents may be legally valid. If they are registered, the government stands to gain through revenue,” National Advisory Council member N.C. Saxena told The Telegraph.
Another amendment deals with mandatory registration of the power of attorney — a written authorisation given by a person to another person to act on his or her behalf.
Saxena said non-registration of the power of attorney has led to an increase in disputes. Multiple persons are given the power of attorney for a particular piece of property, a practice that is used to take buyers for a ride.
The proposals were circulated among all state governments, most of which have supported them, an official said. A bill incorporating the amendments is now being examined by the law ministry. Once approved, it will be sent to the cabinet and introduced in Parliament for passage. Since registration of property features on the concurrent list, the provisions will be binding on the states if Parliament passes the bill.
The proposed amendment also seeks to computerise and update land records. An official said that while updating the records, the land department of the state government would have to carry out a physical survey. The survey will mention the prevailing market price of land in the area, which may help check under-valuation.