BAJAJ BROKING

Notification close image
No new Notification messages
card image
Ellenbarrie Industrial Gases IPO is Open!
Apply for the Ellenbarrie Industrial Gases IPO through UPI in just minutes.
delete image
card image
Start your SIP with just ₹100
Choose from 4,000+ Mutual Funds on Bajaj Broking
delete image
card image
Open a Free Demat Account
Pay ZERO maintenance charges for the first year, get free stock picks daily, and more.
delete image
card image
Trade Now, Pay Later with up to 4x
Never miss a good trading opportunity due to low funds with our MTF feature.
delete image
card image
Track Market Movers Instantly
Stay updated with real-time data. Get insights at your fingertips.
delete image

A Detailed Guide on Indemnity Bond for Property

An indemnity bond is a legal document often required during property-related transactions to cover any potential losses that may arise due to disputes or unforeseen circumstances. It is a contractual agreement where one party undertakes to compensate the other for any loss or damage caused by specific incidents. In property dealings, this document ensures that any risk or liability is clearly defined and managed.

In India, indemnity bonds are widely used when transferring property titles, particularly in cases where original documents are missing, or ownership needs clarification. This document is considered by authorities during various legal or administrative procedures as a declaration and acceptance of responsibility. An indemnity bond for property generally serves as protection against legal or financial issues linked to ownership, possession, or documentation.

The bond typically includes specific details such as the names of the parties involved, the nature of indemnity, the liability amount, and the conditions under which the indemnity becomes applicable. It helps prevent disputes and provides clarity in situations involving uncertainty or missing legal paperwork. Properly drafted and stamped, this document can be used in numerous civil and governmental processes.

Why is an indemnity bond important?

An indemnity bond plays a specific role in formal transactions involving risks, such as those in property transfers. In such cases, it serves as a tool that outlines financial liability in case of unforeseen losses. Its significance arises from the clarity and accountability it introduces in matters of ownership, title verification, or document loss.

The following points explain why it is considered relevant in legal and property-related contexts:

  • Document loss or misplacement:

    When original property documents are lost, an indemnity bond is required by many authorities before reissuing or verifying ownership.

  • Property inheritance and mutation:

    In the event of inheritance, legal heirs may need to submit an indemnity bond to ensure clarity in mutation or ownership transfer.

  • Legal safeguard:

    The bond identifies the indemnifier and indemnified, defining the scope of liability and the agreed compensation in the event of losses.

  • Third-party claims:

    It helps protect against claims from unknown or unverified third parties in certain property matters.

  • Authority requirement:

    Many local bodies and registrars require this bond as part of their process when there are inconsistencies in documents.

The bond serves to document a clear declaration of responsibility. It is a part of the formalisation process where the concerned parties agree on terms without implying future guarantees or endorsements.

Key features of an indemnity bond

  • Includes details of the indemnifier and the indemnified party.

  • Mentions the nature of the indemnity and the scope of compensation.

  • Lists the event or condition that triggers the indemnity.

  • Clearly defines the period of liability.

  • Must be executed on non-judicial stamp paper.

  • Requires signatures of involved parties and witnesses.

  • May require notarisation based on local regulations.

Advantages of using an indemnity bond

  • Provides a documented allocation of risk in property matters.

  • Establishes clarity in situations of document loss or ownership dispute.

  • Can be used as part of the formal record in mutation or inheritance.

  • Helps prevent delays in administrative processes.

  • Acts as supporting evidence in civil proceedings, if required.

Calculating stamp duty on an indemnity bond

Stamp duty is a statutory charge imposed by the government on the execution of certain legal documents, including indemnity bonds. The purpose of this levy is to provide official recognition to the document and ensure its legal admissibility in courts. In India, stamp duty is regulated by both central and state laws, with the actual rates and regulations being governed predominantly at the state level.

The rate of stamp duty applicable on an indemnity bond varies across different states. For example, in Maharashtra, stamp duty is governed under Article 34 of the Bombay Stamp Act, which prescribes a flat rate of ₹500 for indemnity bonds. Meanwhile, other states such as Karnataka or Delhi may impose a fixed charge or calculate the duty as a percentage of the bond's value, especially if the bond includes a specified monetary liability.

Several factors influence the stamp duty payable on indemnity bonds. The location where the document is executed plays a crucial role, as each state has a distinct stamp duty schedule. Additionally, if the indemnity bond includes a specified value, such as a financial guarantee, the amount of indemnity could affect the final duty amount. Bonds issued for property-related matters may also attract different rates compared to those issued for other purposes, like loss of documents.

The nature of the indemnity bond further affects the stamp duty. General indemnity bonds often have standard charges, while bonds tied to specific property transactions, financial obligations, or legal disputes might fall under different categories with varied stamp duty implications. Furthermore, documents involving high-value liabilities may be subjected to proportionate stamp duties in certain jurisdictions.

In some states, additional steps such as notarisation or registration with local authorities may be necessary, which could involve extra charges. These formalities depend on the intended use and legal requirements applicable in the respective state. Therefore, it is essential to consult the local registrar or stamp duty authority to determine the applicable rate and compliance process before executing an indemnity bond.

Affidavit vs. indemnity bond: Key differences

While both affidavits and indemnity bonds are legal documents used in formal declarations, their purpose and structure are distinct. Below are the differences:

  • Nature of document:

    An affidavit is a sworn statement of facts, while an indemnity bond involves a legal commitment to compensate for losses.

  • Parties involved:

    Affidavits are usually unilateral, signed by one party. Indemnity bonds involve at least two parties – the indemnifier and the indemnified.

  • Liability clause:

    Indemnity bonds specify liability and financial compensation; affidavits do not.

  • Usage:

    Affidavits are used for declarations; indemnity bonds are used to cover potential risks.

  • Stamping:

    Indemnity bonds require higher stamp duty than affidavits, which can be executed on lower denomination papers.

Various types of indemnity bonds

Indemnity bonds can be classified based on the nature of the transaction or the field in which they are used. They are applicable in several sectors, including property, finance, legal, and employment.

1. Indemnity bond for property

Used when transferring property ownership, especially in cases where original documents are missing or there is a requirement from the municipal body or registrar. This type of bond protects against potential legal issues in the transfer process.

2. Indemnity bond for lost share certificates

This is used when share certificates of a company are misplaced or destroyed. The company may request an indemnity bond before issuing duplicate certificates to the shareholder.

3. Indemnity bond for bank-related issues

Banks may require such bonds when fixed deposit receipts or account instruments are lost. The indemnity bond ensures that the bank is not held liable if the lost instrument is misused.

4. Employment-related indemnity bonds

Organisations sometimes require new employees, especially in technical or trained positions, to sign indemnity bonds stating that they will serve for a certain period, or compensate if they leave early.

5. Indemnity bond for loan repayments

In certain cases, loan providers ask for indemnity bonds if there are specific risks involved, such as unclear guarantor status or unavailability of primary documents during disbursement.

Share this article: 

Frequently Asked Questions

No result found

search icon
investment-card-icon

What Is Foreign Currency Convertible Bonds (FCCB)

Foreign Currency Convertible Bonds (FCCBs) are debt instruments issued in a foreign currency. Learn more about FCCBs online at Bajaj Broking.

investment-card-icon

What is Step-Up Bond

A step-up bond offers increasing interest payments over time. This structure benefits investors by providing higher yields as the bond matures.

investment-card-icon

What are Bullet Bonds

A bullet bond is a debt instrument that repays the full principal amount at maturity, with no periodic principal payments during its term.

investment-card-icon

Convertible Debentures

Convertible debentures offer fixed income with the option to convert into equity. Learn how they work, their types, and their benefits in corporate finance and investing.

investment-card-icon

Deep Discount Bonds

Deep discount bonds are issued at a price below face value and offer long-term growth potential. Learn how they work, their risks, and who should consider investing.

investment-card-icon

Non Convertible Debentures (NCDs)

Non-Convertible Debentures offer fixed returns with unique features. Get insights on types, buying process, and key factors to consider before investing in NCDs.

investment-card-icon

Indemnity Bond for Property

Get a clear insight into indemnity bonds for property, their importance, features, benefits, and how to calculate stamp duty effectively and confidently.

investment-card-icon

Different Types of Government Securities in India

Government securities like T-Bills, Bonds, and SDLs offer secure options for investors. See how each type works and contributes to a balanced portfolio.

investment-card-icon

How To Start Algorithmic Trading? Concepts & Examples

Start algorithmic trading with our step-by-step guide. Learn key strategies, tools, and platforms to launch your algo trading journey confidently.

investment-card-icon

What Are Partly Paid Shares? Meaning & Benefits

With partly paid shares, investors commit capital in phases. See how this structure functions, its strategic uses, and the risks involved in shareholding.

Disclaimer :

The information on this website is provided on "AS IS" basis. Bajaj Broking (BFSL) does not warrant the accuracy of the information given herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or suitability for any particular purpose. While BFSL strives to ensure accuracy, it does not guarantee the completeness, reliability, or timeliness of the information. Users are advised to independently verify details and stay updated with any changes.

The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.

Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.

Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

[ Read More ]

For more disclaimer, check here : https://www.bajajbroking.in/disclaimer

Our Secure Trading Platforms

Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading

Bajaj Broking App Download

10 lakh+ Users

icon-with-text

4.4 App Rating

icon-with-text

4 Languages

icon-with-text

₹5100+ Cr MTF Book

icon-with-text
banner-icon

Open Your Free Demat Account

Enjoy low brokerage on delivery trades

+91

|

Please Enter Mobile Number

Open Your Free Demat Account

Enjoy low brokerage on delivery trades

+91

|