Table of Contents
- What is a gift deed?
- What gifts require a gift deed?
- How to draft a gift deed?
- Important clauses to mention in a gift deed
- Sample format of a gift deed
- Documents required to register a gift deed
- Charges for registering a gift deed
- Should I pay stamp duty for gift of property to an NGO?
- Can I revoke a gift deed?
- Income tax on gift deed
- Tax exemption for gift of property
- Gift deed versus will
A gift of property, involves conferring the ownership of one’s property on to another, through a gift deed. Gifting a property to a near and dear one, has certain monetary implications that you should consider first.
What is a gift deed?
A gift deed is an agreement that is used, when a person wishes to gift his property or money to someone else. It can be a moveable or immovable property that is gifted voluntarily, from the donor to the donee. A gift deed allows the property owner to gift the property to anyone and avoids any future dispute arising out of succession or inheritance claims. A registered gift deed is also evidence in itself and unlike in the case of a will, the transfer of property is instant and you will not be required to go to the court of law for its execution and hence, it also saves time.
What gifts require a gift deed?
A movable property, or immovable property, or an existing property that is transferable, can be gifted and require a gift deed. Having a gift deed registered, will help you avoid any litigation that comes up thereafter.
How to draft a gift deed?
A gift deed must include the following details:
- Place and date on which the deed is to be executed.
- Relevant information regarding the donor and the donee, such as their names, address, relationship, date of birth and signatures.
- Complete details about the property.
- Two witnesses to bear testimony and their signatures.
Thereafter, depending on the value determined by the state government, the gift deed must be printed on stamp paper after paying the required amount and the deed should be registered at the registrar or sub-registrar’s office.
Important clauses to mention in a gift deed
Here are some important things that should be mentioned in the gift deed.
There’s no money or force involved
Make sure that you add this consideration clause to the gift deed. It must be indicated that there is no exchange of money and that the gift deed is made solely out of love and affection and not due to money or coercion.
You are the owner of your property when you gift
Only the owner can gift a property. If you are not the owner (title holder) of the property, you cannot gift it to someone else, even in anticipation.
Describe the property
All information pertaining to the property, such as the structure, type of property, address, area, location, etc., must be mentioned.
Relationship between the donor and the donee
If the donor and donee are blood relatives, some state governments may offer a concession on stamp duty. Even otherwise, it is important to establish the relationship between the donor and donee.
If there are rights or liabilities attached to the gift, such as whether the donee can sell or lease the property, etc., such clauses should be mentioned.
This mentions the expressed or implied action of delivery of possession of the property.
Revocation of the gift
The donor can also mention clearly if he/she wants a revocation clause to be adhered to the gift deed by the donee. Both, the donor and donee, must agree on this clause.
Sample format of a gift deed
Documents required to register a gift deed
Apart from the aforementioned documents, you will need to produce the original gift deed, as well as ID proof, PAN card, Aadhaar card, the sale deed of the property, as well as other documents pertaining to other agreements regarding this property.
Charges for registering a gift deed
To register the gift deed, you will be required to pay the stamp duty, which varies from state to state. You can also pay the stamp duty online or at the registrar’s office. The stamp duty in various states is as follows:
|Gujarat||4.9% of the market value|
|Karnataka||Family members: Rs 1,000- 5,000
Non-family: 5.6% of the land value
|Maharashtra||Family members: 3%
Other relatives: 5%
Agricultural land/ residential property: Rs 200
|Punjab||Family members: NIL
Women: 4% and 3%
SC/ST or BPL: 3%
To wife: 1%
Immediate family: 2.5%
|Tamil Nadu||Family members: 1%
|Uttar Pradesh||Men: 7%
|West Bengal||Family members: 0.5%
Above Rs 40 lakh: Surcharge of 1%
Should I pay stamp duty for gift of property to an NGO?
In usual cases, gifting a property to an NGO or charity centre does not incur any stamp duty. However, you must check with your state authority, regarding the rules. Also, in many cases, NGOs may not be allowed to accept property as a gift. It is advisable that you hire the services of an advocate, to find this out.
Can I revoke a gift deed?
After the property has been gifted, lawfully, it becomes the donee’s and cannot be revoked easily. However, according to Section 126 of the Transfer of Property Act, 1882, revoking of a gift may be allowed under certain circumstances:
- If the gift deed was made due to coercion or fraud.
- If it is determined that the grounds were immoral, illegitimate or reprehensible.
- If it was agreed upon from the beginning that the gift deed is revocable under certain circumstances.
In such cases, even in the event of the death of the donor, his legal heirs can go ahead with the revocation.
Income tax on gift deed
Gifts have to be declared in the Income Tax Returns (ITR). In 1998, the Gift Tax Act of 1958 was abolished, only to be reintroduced in 2004. Therefore, in case you have been gifted an immovable property, you will have to pay tax, if its stamp duty value exceeds Rs 50,000 and if the property is received without necessary consideration. For example, if the consideration is Rs 1.5 lakhs while the stamp duty was Rs 4 lakhs, the difference between the two exceeds Rs 50,000.
Tax exemption for gift of property
If the property has been received from any of the following, then, the above clause shall not apply and the donee will not be taxed:
- If received from relatives by an individual and from a member by a HUF.
- If received on the occasion of the marriage of the individual.
- If received under a will or by way of inheritance.
- If received in contemplation of death of the payer or donor.
- If received from a local authority (as defined in Explanation to Section 10(20) of the Income-tax Act).
- If received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in Section 10(23C).
- If received from a trust or institution registered under Section 12AA.
Gift deed versus will
|Functional even during the lifetime of the donor.||Operates only after the death of the testator.|
|Cannot be revoked/ can be revoked only under specified circumstances.||Can be revoked many times.|
|Is required to be registered under Section 123 of Transfer of Property Act, 1882 and Section 17 of the Registration Act, 1908.||Need not be registered.|
|Charges include stamp duty and registration charges.||A will is comparatively cheaper.|
|Falls under the ambit of Income Tax.||Governed by the Law of Succession.|
Can a property be gifted to a minor?
In case the property is being gifted to a minor, his/her legal guardian must accept it on the minor’s behalf. The minor may also accept or return the gift if he/she chooses to do so, after attaining the legal age.
Will I have to pay something in return for the property I receive as gift?
No, a gift is a gift by all means. The only charges paid by the donor, is the stamp duty and registration charges and other nominal charges that crop up because of legalities. However, if the value of property/gift exceeds Rs 50,000, you may have to show it in your ITR depending, upon whom you received it from.
Can a property received as a gift be sold?
If there were no conditions attached to your gift and provided you have a registered the gift deed, you can sell the property.
Will the donee be liable to pay dues on the gifted property?
Yes, the donee becomes the legal owner and will then need to pay all dues and charges, such as electricity and maintenance charges, municipal taxes, etc.