Is RTGS Payment Suitable for Property Sale Consideration?
Property transactions often involve complex financial arrangements, with a variety of payment methods available. Among these, Real-Time Gross Settlement (RTGS) presents an alternative to traditional methods like cheques. Let's explore whether it's feasible to use RTGS for paying property sale consideration, and the implications of such a decision.
RTGS vs. Cheque: A Quick Payment Mechanism
RTGS and cheques are both methods of payment, but they differ significantly in terms of speed and legal implications. RTGS, or Real-Time Gross Settlement, is a real-time payment system that clears financial transactions between banks instantly without waiting for the clearing process to occur. On the other hand, cheques are manually processed and can take several days to clear.
While cheques require the physical encoding of the payment and then physical delivery or clearing in the bank, RTGS transactions are digital, eliminating the need for physical checks. Both methods have their own reference numbers: UTR (Unique Transaction Reference) for RTGS and cheque numbers for cheques. The absence of a cheque number in a sale deed when RTGS is used does not affect the legality of the transaction, provided that the transfer is legitimate and records are properly maintained.
Common Practice of RTGS in Property Transactions
Property transactions often involve large sums that require efficient and secure payment methods. RTGS has become a popular choice, particularly for large transactions. In these cases, the transaction reference number (UTR) is mentioned in the sale deed instead of a cheque number. This provides a clear and concise record of the transaction, which can be easily traced and verified.
A significant difference between cheques and RTGS is that RTGS payments are processed and settled before the entry of the transaction in the register, while cheque payments are typically settled after the registry has recognized the transaction. This procedural difference eliminates the risk of the seller not encashing the cheque, as is sometimes a concern with cheques.
RTGS Transactions and Bank Compliance
When transferring funds through RTGS, the bank does not need to know the source of the funds. This makes RTGS a preferred method for large and secure transactions. There is a minimum amount threshold for using RTGS—transactions must be at least ?2 lakhs (approximately $2,800) with no maximum limit. However, it is crucial that the payment is made as per the terms and conditions mentioned in the sale deed and not otherwise.
Legal Considerations for Buyers
Buyers intending to use RTGS for property transactions should be aware that this may lead to legal complications. If the seller is not encashing the cheque, this has legal repercussions, but RTGS transactions face fewer issues in this regard due to the real-time nature of the payment.
Another consideration is that if the payment is made via RTGS, the buyer will naturally stop the cheque payment to avoid a double payment. However, this can create legal complications for the buyer regarding the legality of the sale deed. Therefore, while RTGS is a viable and efficient payment method, it is not without its risks.
In conclusion, while RTGS can be a suitable method for property sale consideration, it is essential to weigh the potential legal and practical implications carefully. Consulting a legal expert is highly recommended to ensure compliance with all relevant legal statutes and regulations.