The name makes it obvious to a discerning buyer. While a sale deed is executed to formalize property sale, a gift deed is executed if the same property has to be gifted. However, a great deal of confusion may prevail when it comes to what qualifies as gift and sale.
What is sale of a property?
In case, when the owner of a property receives monetary compensation for the ownership transfer, this transaction would qualify as sale.
What is property gifting?
In case, when the owner of a property does not receive any monetary compensation for the ownership transfer of his/her property, the transaction would qualify as gifting.
A gift deed must be registered after the payment of the applicable stamp duty and registration charges to be legally binding.
Sale deed versus gift deed
An exchange of property where money is involved ─ no matter how insignificant ─ would qualify as sale under the provisions of the existing laws in India.
Clarifying this, the Rajkot Bench of Income Tax Appellate Tribunal said that property gifted to a mother for a negligible amount of Rs. 5 Lakh would not amount to gifting.
As a result of this, the stamp duty calculations will be different for the buyer of a property. Similarly, the person selling the property will be responsible to pay the applicable capital gains tax.
In case of gifting, stamp duty rates are low as compared to sale. In gifting, capital gains tax is not applicable either, considering the doner of a property does not make any profit through exchange.
See also: Agreement to Sale Vs Sale Deed
Sale deed and gift deed: Similarities
- Both are instrument of property transfer.
- Both gift and sale deed come into effect as soon as it is executed.
- Both need to be registered to have legal sanction.
- Both are admissible in a court as proof of ownership.
- Gift deed can be revoked in special circumstances. The same is true for sale deed as well.
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Sale and gift deed: Difference
- Unlike a sale deed, the donor of a gift does not receive money.
- Stamp duty rates are higher for sale deed. In some states, there is no stamp duty on property gifting among relatives.
- Sale attracts capital gains tax. No such tax is applicable on property gifting.
See also: 5 ways to transfer property in India
FAQs
What is a gift deed?
A gift deed is a legal document that describes voluntary transfer of gift from the owner of a property to the receiver of a gift. This exchange takes place without any exchange of money. In other words, gift deed is a contract between donor and donee, defining simultaneous and reciprocal act of give and take.
Is registering a gift deed mandatory?
Under Section 123 of Transfer of Property Act, registration of a gift deed through which an immovable property is being transferred is mandatory.
Can a property be gifted to a minor?
Yes, a property can be gifted to a minor.
Do I have to pay if I receive property as gift?
A property received by an individual is taxable if the stamp duty value of such property exceeds Rs. 50,000. Recipients of the property can be taxed under 'Income from other sources' as per Income Tax Act, 1961.
