Gift Deed: Everything You Need to Know

Fri, 05/12/2023 - 06:50

Author: JLL


Have you ever heard of a gift deed, or is this your first-time learning about gifting a property legally? Well, you can gift property legally to anyone you wish to. This right is conferred upon the citizens of India under the Income Tax Act 1882. Due to the division of joint families, a gift deed in blood relation is common in India, in which the parents gift their property to their son or daughter. However, there are certain gift deed rules that must be followed during documentation process.

So, let us find out more about gift deed and its rules.

What is a gift deed in India?

A gift deed is an agreement used to voluntarily give away movable or immovable property to someone with no exchange of money. This deed empowers the owner to gift the property to anyone he wishes. It is a significant document that reduces the chances of legal disputes occurring due to inheritance or succession claims. The registered gift deed is efficient and works as evidence in the court of law. In gift deed, the owner of the property is referred as the donor, and the person receiving the property as a gift is referred as the donee (recipient).

A gift deed rule under the Transfer of Property Act

The gift deed is governed by the Transfer of Property Act of 1882, which clearly authorises the owner to transfer their property as a gift deed. However, the donor must gift the property with no monetary exchange, and the donee (recipient) must accept the gift without any hesitation. The gift deed becomes effective only after registering it in registrar or sub-registrar office. In case of inheritance or succession claims, gift deed acts as evidence in the court of law.

Below are the possibilities where you can consider your property in a gift deed-
a. When making the gift, the property specified in the gift deed must exist.
b. The donor of the property in question must be the legal owner with a clear title.
c. The gift must be given voluntarily.
d. The gift must not include any monetary transaction.
e. The Donee (recipient) must accept the gift.

Components of the Gift Deed

There are several components that are vital to include in a gift deed. The first thing that a gift deed states is that the property is transferred voluntarily and not under pressure or threat. It also mentions that the property is gifted by the donor to the donee (recipient) out of love and affection with no intension to gain monetary benefit against the property gifted. Further, it also includes the donor and donee’s information along with property details such as area and dimensions. Moreover, the gift deed empowers the donee with all legal rights on the property to lease, rent, sell, and mortgage. The gift deed must be signed by donee in the presence of two witnesses to proclaim the acceptance to the gift.

How do I draft a gift deed?

The gift deed has its standard gift deed format, which includes the place and date on top of the gift deed format. The parties involved, i.e., the donor and donee, should mention all the relevant information, including name, address, date of birth, and signature. The gift deed also includes details about the property, such as its dimensions and area. While drafting, make a provision for witnesses to sign the gift deed. Lastly, a gift deed must be printed on stamp paper and registered in a registrar or sub-registrar's office to make it effective.

Essential documents required for gift deed registration

Gift deed registration is backed by many documents. Below are those documents to ensure a smooth registration process.
• Identity proof, like an Aadhar card, passport, driving license, etc., of all parties involved in the gift deed, i.e., the donor, the donee, and witnesses.
• A PAN (Permanent Account Number) card of all parties involved in the gift deed, i.e., donor, donee, and witnesses.
• Passport-size photographs of both parties
• Address verification for witnesses
• An original gift deed accompanied by a sale deed or title deed to support and prove the donor's ownership.

Stamp duty on Gift deed

Stamp duty on a gift deed is an important part of gift deed registration process that must be considered based on income tax rules. Earlier, receiving gifts was not taxable; however, after 2017, gifts are taxable under Section 56 of the Income Tax Act of 1961. This act states that any gift exceeding the sum of Rs. 50,000 is taxable under the heading "Income from Other Sources." In the case of immovable property, if the stamp duty charges exceed Rs. 50,000, then the stamp duty value of the gift is taxable and must be borne by the Donee. Note that the stamp duty charges on gift deed vary from state to state.

Can a gift deed be revoked?

A gift deed can be revoked only in case you have a pact of revoking the gift in certain events. Without such an obligation, a gift cannot be revoked. Even the donor alone cannot revoke the deed. It must be a mutual revocation or a breach of any condition or obligation you earlier included in the gift deed process.

If you are the donee, having a gift deed as a legal document is critical to proving your ownership of the property in any legal proceedings. Therefore, having a gift deed is important as far as legal procedures and claims are concerned.