What is the difference between Agreement of Sale and Sale Deed?

Last Updated at: Aug 30, 2022
What is the difference between Agreement of Sale and Sale Deed?


Recently, the Hyderabad bench of the The Income Tax Appellate Tribuna (lITAT), Hyderabad Court, has held that section 50C of the 1961 Income Tax Act does not apply where an assessee carried out a selling act for the children of assessees by GPA holders.


If the transfer of a property is on a future date and is subjected to further terms and conditions, then it is known as an agreement of sale. An agreement of sale becomes a sale when the terms and conditions are satisfied or when the time lapses for the property to be transferred. By this, we can conclude that a sale deed is formed if it is subject to an immediate transfer of the property. If not, it is an agreement of sale. In this blog, let us further dig on the differences between agreement for sale and sale deed.

When a property transfer is meant for future and there are terms and conditions, then it is called agreement of sale. It will become a sale when all the terms and conditions are met or the time for the property transfer lapses. A sale deed is formed when there is immediate property transfer. Get to know the differences clearly from here.

In general, the immovable property holds a greater value compared to the movable property because it includes sales related to complicated procedures. Sale of the immovable property also requires detailed description and understanding of the entire process and roles of the parties. Therefore, for the sale of immovable property, the first step is to draft an agreement of sale.

Agreement of Sale

An agreement of sale can be generally defined as a memorandum of agreement deed where the terms and conditions of a potential contract of sale are enumerated along with the offered consideration and payment details. In the sale of the immovable property, it is one of the important documents because sale deed is based on it. It allows the sale process to happen smoothly by explaining step by step. This helps in building a better understanding between both the parties and their specific roles in the sale.

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Important features involved in the agreement of sale

  1. Offer to purchase the property and agreement of sale.
  2. The complete report of the property.
  3. The prerequisite requirement of no encumbrances and good marketable titles.
  4. Details of the payment along with earnest money.
  5. Providing with original documents after the payment.
  6. Drafting the sale deed and registration if the titles found to be genuine.
  7. Process of delivering the property
  8. Refunding the earnest money, if the titles found to be not proper.
  9. Remedies for non-completion of sale from the side of the vendor along with the specific performance and bearing of the expense of proceedings.
  10. Penalty on the earnest money, if the purchaser fails to complete the sale.
  11. Action if the property gets affected by any kind of government notices.
  12. Production of tax-related documents.
  13. Description of the property schedule.
  14. Memo consideration for the received earnest money.

Along with these documents, any other necessary documents should be attached for the agreement of sale. This shows the willingness of both the parties in selling and buying a property in question and concludes in the creation of the actual sale deed. So, this cannot be called a sale deed because it does not create any kind of rights on the property for the buyer.

Sale Deed

A sale deed is generally a document which transfers the rights of a party with a property of another property. It is majorly drafted as a continuation of the agreement of sale. All the terms and conditions which are mentioned in the agreement of sale will be satisfied and observed in the sale deed.

Important features involved in the sale deed-

  1. Explanation of the property and ownership.
  2. Titles verified by the purchaser.
  3. Reference to the agreement of sale and the amount details.
  4. Discharge of the property with details of facilities measurements, easements, privileges and other rights.
  5. Transfer of all rights, claim, interests, demand etc. of the property.
  6. Providing peaceful enjoyment of the property without any kind of interruption.
  7. Indemnifying the purchaser against all the losses arising out of actions of the seller or heirs
  8. The complete authority of the vendor to sell.

So, basically, sale deed mentions mainly the transfer of property and rights. Along with this, the other terms and conditions mentioned in the agreement of sale. Therefore, the sale deed can be drafted briefly.

The agreement to sale deed format can be viewed by clicking this link.

The significant difference between the agreement of sale and sale deed

A sale indicates immediately the transfer of the property. It is accomplished through a sale deed, while an agreement of sale indicates future transfer. Risks in the sale are transferred immediately, whereas they remain with the seller in case of agreement of sale. A sale is an executed contract, whereas agreement of sale is an executors contract.

There are chances of breach of sale resulting in a suit for the price as well as damages, whereas any kind of breach of terms and conditions of an agreement of sale will result only in the suit for damages. A sale deed is considered as a mandatory registered instrument whereas an agreement of sale differs from state to state.