Can a gifted property be sold in India?

If a person wishes to gift a property to someone, he can do so through a gift deed. According to Section 122 of the Transfer of Property Act, 1882, property is transferred through a registered gift deed by the donor to the donee without any exchange of money. There are laws associated with gifting a property, and a property can be gifted with taxes. The most common question that people ask is whether a gifted property can be sold in India or not.

Check how an ancestral property can be gifted

What is a gifted property?

Gifted property refers to a movable or immovable property that has been transferred by the owner to another person as per the provisions of Section 122 of the Transfer of Property Act of 1882. The property transfer is made through a registered gift deed.

The following criteria must be met when finalising a gift deed.

• The details of the donor and donee along with the relationship they share, must be specified.
• Declaration of voluntary transfer of property must be made.
• Clauses for ownership of property must be defined.
• All details about the property should be mentioned.
• The document should mention the acceptance of the property by the donee.
• The deed should express the intention of delivering possession of the property, expressly or impliedly.
• Names and details of the witnesses, along with their signatures, is mandatory.
• The revocation clause of the gifted property can be specified to avoid future conflict.

Can a gifted property be sold?

In India, it is common practice to gift a property. According to the law, once the property is transferred in the receiver’s name, he has the right to sell the property. However, it must first be registered under the Transfer of Property Act of 1882 in the receiver’s name and without any conditions. When it comes to property transfer, a gift deed and a sale deed have the same legal relevance. The seller is liable to clear any taxes and dues before selling a gifted property. Once completed, a gift is binding on the donor.

If a gifted property mentions no conditions, it cannot be revoked. However, some gifted properties include conditions attached to their transfer and use. These are referred to as conditional gifts. Section 126 of the Transfer of Property Act 1882 mentions provisions that should be followed in this case.

What is the validity of a gift deed?

A gift deed is said to be valid only if it is registered with a sub-registrar. Further, it must be signed by both parties and stamp duty and registration charges must be paid. The gift deed will be valid forever unless certain conditions regarding its validity have already been mentioned.

According to the Transfer of Property Act 1882, a gift deed is valid only if it has the following criteria.

• The property must exist when the gift deed was made.
• The person gifting the property must be the legal owner with a clear title.
• The gift must not involve any exchange of money.
• The donee should accept the property gifted by the donor.

What happens if a conflict arises?

In case a conflict arises and one of the parties challenges the gift deed in a court, the donee will not have the right to sell the property after the cancellation of the deed.

Is capital gains tax applicable on the sale of the gifted property?

According to the law, any immovable property received as a gift from a relative with a stamp duty value exceeding Rs 50,000 is not taxable. Moreover, if a gifted property is held for more than 24 months, the capital gains will be considered Long-Term Capital Gains (LTCG) and taxable at 20%, along with a surcharge and cess. The LTCG is calculated based on the net sale proceeds (that is, after deducting the sales expenses) minus the cost of acquisition and improvement. The cost of acquisition will be the cost at which the property was originally acquired, as increased by any cost of improvement made subsequently. Moreover, exemptions and deductions can reduce the taxable capital gains based on various factors, such as reinvestment in specified assets or claiming indexation benefits.

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