A gift deed in real estate refers to the act of a property owner voluntarily giving their property to anyone and avoids foreseen disputes that might arise out of succession or inheritance claims. A gift indeed!
It involves conferring the ownership of the property on to another via a gift deed and has certain monetary implications that one might need to consider before moving forward. Read on to know more and everything about a gift deed. Is it worth the chance? Let’s find out!
First Things First, What Is A Gift Deed ?
As mentioned above, a gift deed is an agreement that is used by the owner of a property if they wish to gift the assets (here, property), money, and/or it can be a moveable or immovable property gifted voluntarily, from the donor to the donee.
It allows the owner of the property to gift the property to anyone under the sun to avoid any dispute out of succession or inheritance claims. A registered gift deed is also a piece of evidence in itself which, unlike a will, is instant with no court of law included for its execution, saving a lot of time in hand.
These gifts can include anything movable property, immovable property, and/or an existing transferable property provided it is registered to avoid any litigation that might come up.
Gift deed VS Will
| GIFTED DEED | WILL |
| It is functional even during the lifetime of the donor | Is functional post the death of the testator |
| It can only be revoked in a few incidents, such as fraud, forced, etc | A will can be revoked multiple times |
| It is to be registered under Section 123 of the Transfer of Property Act, 1882 and Section 17 under the Registration Act, 1908 | Doesn’t need to get registered |
| Includes stamp duty and registration charges | Is comparatively cheaper |
| Falls under the Income Tax | Governed by the law of succession |
How To Draft The Gift Deed In Real Estate ?
Before you get to draft a gift deed, make sure it includes:
- The location and date of the deed, which is when it is to be executed
- Any information that is relevant regarding the donor and the donee, such as the names, address, relationship, date of birth, etc
- Complete details regarding the property in question
- Two witnesses to bear the testimony along with the signatures
Note – Depending on the value determined by the state government of India, the gift deed should be printed on stamp paper post the required payment. Afterwhich, it must be submitted at the registrar or sub-registrar office for registration.
What Are The Important Clauses Mentioned In The Gift Deed Format, India ?
A gift deed is a document that must include the following, keeping in mind the clauses:
1) It Shouldn’t Be Forced And Must Be Done In The Absence Of Money
The donor needs to mention this consideration clause in the gift deed. This helps to indicate that there is no exchange of money and that the gift deed is made solely out of love with no money or coercion to have an easy transfer.
2) While Making The Gifting Deed, You Must Be The Owner Of The Property
This is because a gift deed can only be made by the owner of the property. In case you are not the titleholder, the gift deed cannot be anticipated.
3) Property Details
While drafting the gift deed make sure you involve all the necessary information of the property such as the structure, kind of property, address, area, location, etc.
4) Donor And Donee Relationship
The mention of the relationship is necessary as in a few cases if it is blood-related, the state governments offer a concession on stamp duty. Don’t forget to mention it otherwise too.
5) The Liabilities
You need to attach the rights or liabilities to the gift. This includes if the donee is free to sell or lease the property, etc.
6) Delivery Of The Property
This includes the expressed or implied action of delivery possession of the property.
7) Revocation Clause
The donor while creating a gift deed is free to mention if they want a revocation clause to adhere to the donee. Here, it is important for both, the donor and the donee to agree upon the clause.
What Are The Documents And Charges Required To Register A Gift Deed ?
1) Documents Required:
- The aforementioned documents
- Original gift deed
- ID proof such as PAN card and Aadhaar card
- Sale deed of the property
- Other documents pertaining to the agreements of the property
2) Charges For Registering A Gift Deed
In order to register a gift deed, the donor is expected to pay the stamp duty, which varies from state to state. This can be paid online or physically at the registrar’s office.
Here is a tabular representation of the stamp duty across different states:
| STATE | STAMP DUTY |
| Delhi | Men – 6%, Women – 4% |
| Gujarat | 4.9% of the market value |
| Karnataka | Members of the family – Rs. 1000 – 5000, Non-family – 5.6% of the land value |
| Maharashtra | Member of the family – 3%, Other relatives – 5%, Agricultural/residential property – Rs. 200 |
| Punjab | Non- family – 6% |
| Rajasthan | Men – 5%, Women – 3% and 4%, SC/ST/BPL – 3%, Widow – none, Wife – 1%, Immediate family – 2.5% |
| Tamil Nadu | Family members – 1%, Non-family members – 7% |
| Uttar Pradesh | Men – 7%, Women – 6% |
| West Bengal | Member of the family – 0.5%, Non-family members – 6%, If above Rs. 40 lakhs – A surcharge of 1% |
Is It Possible To Revoke A Gift Deed ?
Post the lawful transfer of the property via the gift deed, it becomes quite a hassle to revoke. Nonetheless, according to Section 126 of the Transfer of Property Act, 1882, revoking a gift deed could be allowed in a few circumstances: These include:
- In case the gift deed was formulated under coercion or fraud practices
- If the transferable grounds were immoral, illegitimate, or reprehensible
- If the property was revocable under certain circumstances
Note – If the above cases are true even in the event of the death of the donor, the legal heirs can go ahead with the revocation.
Gift Deed And Income Tax
Yes, gifts can be declared in the Income Tax Returns (ITR). As far as history goes, in 1998, the Gift Tax Act of 1958 was abolished and later reintroduced in the year 2004.
This means, in case you have been gifted an immovable property, the payment of the tax is present if its stamp duty value exceeds Rs 50,000 and/or the property is received without necessary consideration.
For instance, if the consideration is Rs 1.5 lakhs and the stamp duty was around Rs 4 lakhs, the difference, that is 50,000 exceeds.
To Conclude:
There are a few instances where the donee can refrain from paying tax on the gift deed. These include:
- If the gift deed was given by a relative and/or from a member by a HUF (Hindu undivided family)
- If received on the occasion of marriage
- If it was received under a will or inheritance
- If received in contemplation of death of a payer or donor
- If it was received from a local authority
- If received from a fund, foundation, university, or any other educational institution, hospital, or trust or institution
- If it was received from a trust or institution
Gift Deed FAQs
1) Can a donor make a gift deed for a minor ?
In case a donor wishes to gift the property to a minor, the legal guardian will have to accept it on the minor’s behalf. The minor can then legally accept or return the gift after attaining the legal age.
2) Will I have to pay something in return for the property I received as a gift deed ?
No, it is a gift by all means and a donee isn’t expected to pay or give anything in return. However, if the value of property/gift tends to exceed over Rs 50,000, you will have to show it in the ITR, depending on whom you received it in the first place.
3) Can a property received as a gift be sold ?
Yes, it can be sold. Provided there are no conditions attached to your gift and it’s registered.
