Can a seller automatically forfeit earnest money if the buyer defaults?

Not in every case. The result depends on the wording of the contract, whether the payment is truly earnest money or merely an advance, the nature of the breach, and applicable law.

Is stamp duty or registration required for an earnest money receipt?

Requirements vary according to the document's substance, whether it operates as or forms part of an agreement for sale, whether possession is delivered, and the State or Union Territory law. Local stamp and registration rules should be checked before execution.

Updated: 31 August 2026

Earnest Money Receipt Format for Property in India

A practical, editable receipt template for recording earnest money or advance sale consideration paid by a purchaser to a seller in a proposed property transaction.

Important: This sample is a general drafting aid, not a substitute for a properly stamped or registered agreement where the law requires one. Stamp duty, registration, possession, RERA and local property requirements can vary by State or Union Territory and by the nature of the transaction.

What does an earnest money receipt record?

An earnest money receipt records the amount received by the seller from the proposed purchaser, the property to which the payment relates, the agreed sale consideration, the balance payable, and the parties' basic understanding about completion of the sale.

A receipt should clearly distinguish between earnest money, advance sale consideration, and any other payment. The label used by the parties is relevant, but the legal effect ultimately depends on the terms and circumstances of the transaction.

Updated Earnest Money Receipt Format

RECEIPT FOR EARNEST MONEY / ADVANCE SALE CONSIDERATION

This Receipt is executed at on .

I/We, , son/daughter/wife of , residing at ("Seller"), acknowledge receipt from , son/daughter/wife of , residing at ("Purchaser"), of a sum of ₹ (Rupees only) by [bank transfer/cheque/demand draft/other traceable mode], transaction/reference no. , dated .

The above amount is received as [earnest money / advance sale consideration] towards the proposed sale of the property described below.

Property: Property/flat/plot no. , situated at , measuring approximately , together with rights and appurtenances, if any, and more particularly described in the title documents.

Total agreed sale consideration: ₹ (Rupees only).

Amount received under this receipt: ₹ .

Balance consideration: ₹ , proposed to be paid on or before , subject to completion of agreed title/document verification, fulfilment of contractual conditions, and execution/registration of the appropriate sale document.

The Seller states that, to the best of the Seller's knowledge and subject to the title documents and disclosures supplied to the Purchaser, the Seller is entitled to deal with the property. The Seller shall disclose known material defects in the property or title and shall provide the documents reasonably required for verification.

Unless otherwise specifically agreed in writing, the Seller shall clear or account for outstanding dues, charges and liabilities attributable to the Seller up to the agreed date of transfer, and the parties shall record how taxes, maintenance charges, utilities, society dues and other outgoings are to be apportioned.

The parties agree that any consequence of cancellation, default, refund, forfeiture, compensation or payment of an additional amount shall be governed by the written terms agreed between them and applicable law. No amount shall be treated as automatically forfeited or automatically payable at double merely by reason of this receipt unless such consequence is lawfully agreed and enforceable in the circumstances.

This receipt by itself does not transfer ownership or create a sale deed. Where an agreement for sale, stamping, registration or any statutory formality is required, the parties shall comply with the applicable Central and State/Union Territory law before relying on this receipt as the complete transaction document.

Special conditions, if any:

1.

2.

3.

SELLER
Name:
Signature:
Date:

PURCHASER
Name:
Signature:
Date:

Witnesses

1. Name: Address: Signature:

2. Name: Address: Signature:

Important legal points for property earnest money

Under section 54 of the Transfer of Property Act, 1882, a contract for sale does not by itself create an interest in or charge on immovable property. Ownership is transferred only in the legally prescribed manner. A receipt therefore should not be drafted as though payment of earnest money itself transfers title.

Contractual consequences of default are governed by the Indian Contract Act, 1872 and the terms of the transaction. Sections 73 and 74 deal with compensation for breach and stipulated sums or penalties. Courts also distinguish genuine earnest money from a mere advance when considering forfeiture.

If the transaction is with a promoter and falls within the Real Estate (Regulation and Development) Act, 2016, section 13 is important: a promoter cannot accept more than ten per cent of the cost of the apartment, plot or building as advance/application fee without first entering into a written agreement for sale and registering it as required by law.

Registration and stamp-duty consequences can differ between States and Union Territories. The Registration Act, 1908 also contains State amendments, so a generic receipt should not claim that registration is always compulsory or always optional.

Details to verify before signing

Correct names, addresses and identity details of the seller and purchaser.
Seller's title documents and authority to sell.
Exact property description, survey/plot/flat number, area and location.
Total sale consideration and whether the payment is earnest money or advance.
Payment mode, transaction number and date.
Deadline and conditions for payment of the balance price.
Existing mortgage, charge, litigation, acquisition notice, tenancy or other encumbrance, if any.
Responsibility for taxes, maintenance, utility charges and other property dues.
Default, cancellation, refund and forfeiture terms written clearly and fairly.
Applicable stamp duty, registration requirement and State-specific property law.

Official legal references

For current statutory text, use official Government of India sources:

For stamp duty and State amendments, consult the official registration/stamps department of the State or Union Territory where the property is situated.

Frequently Asked Questions

Does an earnest money receipt transfer ownership of property?

No. A receipt or contract for sale does not by itself transfer ownership. The transfer must be completed in the manner required by property and registration law.

Can the seller automatically forfeit the earnest money if the buyer defaults?

Not in every case. The result depends on the contract, the true nature of the payment, the breach, surrounding facts and applicable law. A clearly drafted default clause is preferable to an absolute statement of automatic forfeiture.

Should the receipt say that the seller will pay double if the seller defaults?

Only if the parties deliberately agree to such a term after considering its legal effect. It is not a universal statutory rule for every property transaction.

Is registration compulsory for every earnest money receipt?

Not necessarily. The answer depends on what the document actually does, whether it is or forms part of an agreement for sale, whether possession or rights are dealt with, and applicable State amendments. Local stamp and registration law should be checked.

Drafting note: For a substantial property transaction, a detailed agreement for sale ordinarily gives better protection than relying only on a receipt. Obtain local professional advice where title, possession, registration, RERA, tax, financing or forfeiture issues are material.