What do you need to know about gift deed without possession?

When it comes to property distribution and asset management, utilising a gift deed without possession is a prevalent approach. Through the formalisation of a gift via a deed, individuals can delineate clear and legally enforceable intentions for transferring property or assets. This practice serves to prevent future disputes and accurately represents the donor’s wishes. Such gifting mechanisms play a pivotal role in long-term wealth management and the preservation of a donor’s legacy. This article delves into some important aspects of gift deeds without possession in India, providing insights into their significance and implications.

See also: What is the difference between sale and gift deed?

Gift deed of property: Meaning

As per Section 122 of the Transfer of Property Act 1882, a gift deed serves as a legal instrument for the voluntary transfer of ownership concerning immovable or movable property. Movable properties encompass assets such as jewellery and vehicles, which are easily transportable. On the other hand, immovable properties pertain to fixed assets like buildings and land, which cannot be relocated. A gift deed is executed without any monetary transaction between the donor (the individual providing the gift) and the donee (the recipient of the gift). It is imperative that the donor holds ownership of the gifted property at the time of executing the gift.

Gift deed without possession: Is it valid?

The Transfer of Property Act 1882 stipulates that there is no mandatory requirement to transfer possession in the case of gifting immovable property. In 2014, the Supreme Court, in the case of Renikuntla Rajamma v/s. K. Sarwanamma, declared that the transfer of possession is not obligatory for immovable property, except under Muslim Law.

Registration of gift deed

According to Section 123 of the Transfer of Property Act and Section 17 of the Registration Act of 1908, the property donor is required to register the gift deed. To ensure enforceability, the gift deed must be registered at the Registrar or Sub-Registrar’s office where the property is located. The gift deed should be executed on a stamp paper and submitted for registration at a sub-registrar office. Both the donor and donee must sign all pages, with at least two witnesses attesting. Moreover, the donor must be sound-minded and should make the gift deed while they are alive.

Read also: Can a gift deed be revoked?

Tax on gift deed

Gift deeds must be reported in your Income Tax Returns (ITR). The Gift Tax Act of 1958 was repealed in 1998 but reinstated in 2004. Hence, if you receive an immovable property through a gift deed, you may be liable to pay tax if its stamp duty value exceeds Rs 50,000 and if the property is received without adequate consideration. For instance, if the consideration is Rs 1.5 lakh but the stamp duty amounts to Rs 4 lakh, the disparity between the two exceeds Rs 50,000.

Court rulings regarding gift deeds

According to a 2022 Supreme Court ruling, courts should refrain from assessing the relationship between the donor and donee while establishing the validity of a gift deed. The sole determinant for a valid gift deed is the proper execution of the deed. The apex judicial body has issued various rulings concerning gift deeds in India over time. Let’s review some of the recent judgments by the Supreme Court regarding gift deeds:

• Munni Lal Mahto v/s Chandeshwar Mahto (2006): The court ruled that the ownership of the property must be given away for no money or other benefit.

• Pratima Choudhury v/s Kalpana Mukherjee (2014): The Supreme Court issued guidelines for evaluating the legality of a registered gift deed, specifying criteria, particularly in cases where undue influence impacts the consent of the gift giver.

• R Jamuna Bai v/s MA Anusuya (2001): In this case, the Supreme Court mentioned Section 122, which specifies that the gift becomes void if the donee passes away before acceptance.

Conclusion

Understanding the intricacies of gift deeds without possession is crucial in property distribution and asset management. By formalising gifts through deeds, individuals establish clear and legally enforceable intentions for transferring property or assets, thereby preventing future disputes, and honouring the donor’s wishes. These mechanisms play a significant role in long-term wealth management and legacy preservation. Furthermore, recent Supreme Court rulings underscore the importance of proper execution in determining the validity of gift deeds.

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