A gift of property, involves conferring the ownership of one’s property on to another, through a gift deed. Gifting a property through a gift deed 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. A moveable or immovable property can be gifted voluntarily using gift deed, 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 execution of gift deed and hence, deed of gift also saves time.
See also: What is a title deed?
What gifts should be in a gift deed format?
A movable property, or immovable property, or an existing property that is transferable, can be gifted and require a gift deed. Having a registered gift deed, will help you avoid any litigation that comes up thereafter.
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How to draft a gift deed?
Draft of a gift deed must include the following details:
- Place and date on which the gift deed is to be executed.
- Relevant information on gift deed regarding the donor and the donee, such as their names, address, relationship, date of birth and signatures.
- Complete details about the property for which you draft a gift deed.
- Two witnesses to bear testimony of the gift deed 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 gift deed should be registered at the registrar or sub-registrar’s office.
See also: Partnership deed must be stamped as required by Indian Stamps Act
Gift deed rules
Before gifting a property through gift deed, keep a note of the following points.
Sound health: The donor while executing the gift deed should be in sound mental and physical health so that the gift deed is transferred willfully and not by force.
Encumbrance free: The property that is planned to be gifted should be free of any encumbrances like legal disputes, mortgages or liens. The donor should verify this by doing a thorough title search and then only proceed with executing the gift deed.
Components of property gift deed
Here are some important things that should be mentioned in the gift deed format.
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 give a property as gift deed 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 in the property gift deed format.
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 done in the property gift deed format.
Mention liabilities
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 in the gift deed.
Delivery clause
This on the gift deed 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 gift deed clause.
Maintenance Clause
According to a recent Supreme Court judgment, parents who gift their property in return of being cared for, must insert the maintenance clause in the Gift Deed. If this is not done, the Gift Deed becomes irrevocable even if the children don’t care for the parents.
See also: What is conveyance deed meaning
Disadvantages of property gift deed
● Irrevocable: Once executed, it is very difficult to revoke the gift deed, unless there is a strong evidence for the need of it. For things like change of mind etc. this is not possible and hence one has to be sure before executing the gift deed.
● No control on property: Once the gift deed has been executed, the donor will have no control on the property gifted with the donee gaining full authority.
● Can be misued: A donee can misuse the established system to avoid paying taxes.
Gift deed format
Gift deed registration
As per the transfer of property Act 1882, only when it is registered is a Gift Deed valid. The Gift Deed registration includes the donor’s signature and the donee and attestation by two witnesses.
Gift deed registration: Documents required
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.
Stamp duty on gift deed registration
| State | Stamp duty for gift deed |
| Delhi | Men: 6%
Women: 4% |
| 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
Non-family: 6% |
| Rajasthan | Men: 5%
Women: 4% and 3% SC/ST or BPL: 3% Widow: None To wife: 1% Immediate family: 2.5% |
| Tamil Nadu | Family members: 1%
Non-family: 7% |
| Uttar Pradesh | Men: 7%
Women: 6% |
| West Bengal | Family members: Rs 1,000
Non-family: 6% Above Rs 40 lakh: Surcharge of 1% |
For gift deed registration, 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.
See also: Partition deed: Everything you need to know
Income tax on gift deed
Gift deed 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 as a gift deed, 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 lakh while the stamp duty was Rs 4 lakh, the difference between the two exceeds Rs 50,000.
Tax exemptions for gift deed
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 gift deed received from relatives by an individual and from a member by a HUF.
- If gift deed received on the occasion of the marriage of the individual.
- If gift deed received under a will or by way of inheritance.
- If gift deed received in contemplation of death of the payer or donor.
- If gift deed received from a local authority (as defined in Explanation to Section 10(20) of the Income-tax Act).
- If gift deed 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 gift deed received from a trust or institution registered under Section 12AA.
What if you want to gift property after demise?
If you want to gift a property after demise, you can do that through a will.
What if gift deed is not accepted?
If the recipient doesn’t accept the gift deed till the time the donor is alive, the gift deed is considered void.
Gift Deed versus Will: The difference
| Gift deed | Will |
| Gift deed are functional even during the lifetime of the donor. | Operates only after the death of the testator. |
| Gift deed cannot be revoked/ can be revoked only under specified circumstances. | Can be revoked many times. |
| Property gift deed format 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. |
| For registered gift deed, charges include stamp duty and registration charges. | A will is comparatively cheaper. |
| Gift deed falls under the ambit of Income Tax. | Governed by the Law of Succession. |
Also know all about release deed
Can a property gift deed be revoked?
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 deed may be allowed under certain circumstances:
- If the gift deed was made due to coercion or fraud.
- If it is determined that the grounds of gift deed 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 gift deed revocation.
Can a gift deed be revoked through mutual agreement?
In case a condition is not fulfilled and is not part of the gift deed but a separate mutual agreement form that is part of the gift transaction, the gift deed can be revoked by mutual agreement.
However, note that a gift deed will not be cancelled if the same wasn’t based on misinterpretation or fraud. An individual cannot cancel a gift deed unilaterally. It has to be challenged in the court. Note that anyone who tries to challenge the Gift deed must prove that execution was not acknowledged by the donor and done by a fraud practice.
See also: Can gift deed be revoked
FAQs
What is the rule of gift deed?
The rule of gift deed is that the donor should be legally able to gift. The donor should be in sane mind and should be above 18 years.
What are the benefits of a gift deed?
With the gift deed, you can easily transfer the property from one person to another within the family or outside.
When will be the gift deed invalid?
If the donee doesn't accept the gift during the lifetime of the donor, the gift deed will be invalid.
What is the validity of a gift deed?
Whenever a donor gives an immovable property through gift deed to a donee, then the validity of the gift is forever.
What is a gift deed?
It is a legal document using which a person voluntarily gifts a movable/immovable property to another person.
Is a gift deed considered as a legal document?
Yes, a gift deed is a legal document.
What works better for immediate transfer of property- a will or a gift?
For immediate property transfer, a gift deed works.
Can a donor cancel a gift deed?
A gift deed cannot be canceled unilaterally and has to have consent of the donee too.
Who will pay stamp duty on gift deed?
The receiver or the donee has to pay the stamp duty on the gift deed.
What clause should parents insert before gifting property through gift deed to children?
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.
What if property is gifted to NGO?
Can a property be gifted to a minor?
In case the property as a gift deed 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 attached to gift deed. 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 deed 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. while giving the gift deed.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at [email protected] |
With 16+ years of experience in various sectors, of which more than ten years in real estate, Anuradha Ramamirtham excels in tracking property trends and simplifying housing-related topics such as Rera, housing lottery, etc. Her diverse background includes roles at Times Property, Tech Target India, Indiantelevision.com and ITNation. Anuradha holds a PG Diploma degree in Journalism from KC College and has done BSc (IT) from SIES. In her leisure time, she enjoys singing and travelling.
Email: [email protected]
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