What is Gift Deed? : How Can we use and other facts

Admin 20 Apr 2024 2,137 Views

Everyone enjoys giving gifts to family and friends. Despite the fact that gifting is frequent, few people are aware of the legal implications. Gift deeds are the ideal way to give, and in some ways, this procedure outperforms producing a "Gift Deed." Continue reading to learn more about the legal provisions involved and how it is involved in the formation of a "Gift Deed."

What is a Gift Deed, and how does it work?

A gift deed allows the legal owner of a property to transfer it to another person without paying any money. It must be signed by the donor, witnessed by two others, and the gift deed is registered. Stamp duty on gift deeds must be paid on the value of the property, therefore fees will vary by state. Usually, such gifts are presented from one family member to another, but this is not the case. Gift deeds in blood relation(as well as wedding gifts) are exempted from taxation.

Parties in the form of a Gift Deed
A gift deed has two parties: the donor and the donee. The donee is the person to whom the property is gifted, and the donor is the one who gifts his property. At the time of the gift, the donor must be of sound mind and capable of entering into agreements.

A minor is unable to gift property since he or she is unable to enter into contracts. The guardian of a child, on the other hand, can receive presents on behalf of the minor and retain the validity of the gift deed. The donor should give without expecting anything in return, that is, the donor should not get anything from the donee in exchange for making the gift.

What can be given as a gift?
To be considered a gift in Indian law, a property must satisfy the following criteria:

  • It doesn't matter if it is moveable or immovable property.
  • It must be possible to transfer ownership of the property.
  • The house should not be used as a rental in the future.
  • A tangible asset is required.

How to write a gift deed? 
The following information should be included in a gift deed format:

  • The location and timing of executing a gift deed.
  • Names, addresses, relationships, dates of birth, and signatures of the donor and donee are all included in the gift deed.
  • Details of the property you're drafting a gift deed for.
  • Two witnesses are required to testify about the gift deed as well as sign it

The gift deed must then be printed on stamp paper after paying the requisite fee and recorded at the registrar's or sub-office, the registrar's relying on the value deduced by the state government.

Legal Provisions for Gifts of Property

A gift deed is governed under Section 122 of the Transfer of Property Act, 1822, and by numerous sections of The Indian Contract Act of 1872. The offering and accepting of the gift by the doner is final and cannot be reversed later, according to the law. So, if all of the elements for a legitimate donation are met, the gift cannot be revoked by the donor later, unless the permission was obtained by deception, undue influence, or coercion. the High Court and Supreme Court have repeatedly held that a properly given gift cannot be revoked later under any circumstances which were overturned by introducing cancellation of registered gift deed under Senior Citizen Act 2007.

The gift of immovable property is valid under Section 123 of the Transfer of Property Act, 1882, if it is made through a registered gift deed signed by both the donor and the donee and witnessed by two people. When given under a registered gift deed or by giving the property to the donee, the gift of movable property is valid. If you provide an immovable property as a gift, you must register it under Section 117 of the Registration Act.

What presents must be in the form of a gift deed?
You won't be able to give away everything you have. You may sell the self-acquired property if you are a Hindu. Similarly, if you're a coparcener, you can sell your coparcenary interest in a property if certain conditions are met. In some circumstances, a widow may gift a small amount of her husband's estate, although she cannot do so by will.

What distinguishes a gift from a sale deed?
You transfer your property away for money in a sale deed. The deed is recorded and shows the amount you were paid for the property you sold. If it's a gift, though, you're giving up your possessions for no money. A widow may gift a tiny piece of the property she inherited from her husband in certain circumstances, but she cannot do so by will.

Gift deeds are subject to income tax.
After April 1, 2017, gifts are subject to income tax under Section 56(2)(x) of the Income Tax Act of 1961. The value of all gifts received by a person during a year is totally exempt under income tax legislation, as long as the total value of such gifts does not exceed Rs 50,000 in a calendar year. If the total value of all presents received reaches Rs 50,000, the total value of all gifts received becomes taxable, with no threshold exemption. 

Gifts between two close relatives, on the other hand, are treated favorably under income tax legislation. As a result, any asset (movable or immovable) given to specifically designated relatives is totally tax-free in the recipient's hands, with no maximum limit. Parents, spouses, siblings, spouse's siblings, lineal ascendants, and descendants of the person and his or her spouse are all included in the list of close relations.

Stamp Duty on gift deeds

Gifting is the act of a person voluntarily transferring some or all of his or her ownership rights in an asset to another person for no monetary payment. Given that the donor is not earning anything from the transfer of ownership of the property, it may appear bizarre that a donor is asked to pay a fee in order to gift his property to another person. Despite the fact that this is not a conventional transaction, donating a home has tax and stamp duty ramifications. In India, the stamp duty on gift deeds varies by state and can range from 2% to 7% of the property's value.

Registration fee for gift deed
Gift deed registration fees, like those for other deeds involving property exchange, must be paid in order for this document to be legally binding. Some states charge 1% of the property's value as a gift deed registration fee, while others impose a flat price.

What grounds exist in India for canceling a gift deed?
Cancellation of Gift Deed in India is governed under Section 126 of the Transfer of Property Act, 1882. The Property gift deed rules for cancellation are:

If certain circumstances indicated in the gift deed happen or don't happen without the donor's knowledge or control. In the registered deed, this ground should be indicated. To be legally binding, it should be included in the gift transaction if it is addressed directly in a separate agreement.
If permission to the agreement is obtained through deception, undue influence, misinterpretation, or coercion, the revocation/cancellation terms shall not be abhorrent or illegal to the property.

The central government passed 'The Maintenance and Welfare of Parents and Senior Citizens Act, 2007' (The Maintenance Act) to ensure that parents and senior citizens are properly cared for by their children or legal heirs.

Final Thoughts
Many legal consequences, such as tax problems, can arise when drafting a gift document for immovable property. When it comes to immovable property, it's best to hire a lawyer to create a gift deed and related legal advice.

About Author

Jatin Dubey

An enthusiastic content writer who is a law graduate and has been working as Real Estate Consultant for around 9 years.
He has worked with top Real Estate Agencies and Builders in Delhi, Bangalore and Pune. His skills to perform market analysis and explore high potential localities has helped many clients in the past.

An enthusiastic content writer who is a law graduate and has been working as Real Estate Consultant for around 9 years.
He has worked with top Real Estate Agencies and Builders in Delhi, Bangalore and Pune. His skills to perform market analysis and explore high potential localities has helped many clients in the past.

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