Transfer of Property through a Gift Deed- All You Need to Know

There are several methods for transferring property that you own. It could be through a sale, a will, or a gift. Executing a gift deed in favour of the recipient is a common method, especially when transferring to a family member or friend. Even though there is no monetary transaction, the gift deed must be registered in order for the transfer to be valid.

While a will is one of the most well-known ways to leave your property to your legal heirs, there is another tool that can help you achieve the same result with fewer conflicts. You can transfer your property to whomever you want using a gift deed, but first consider the following points.

What is a gift deed?

A gift deed is a legal document or instrument that allows a person to voluntarily transfer any movable or immovable property owned by him to another person without payment. The person giving the gift is known as the 'donor,' and the person receiving the gift is known as the 'donee.' The Transfer of Property Act 1882 governs the transfer of property as a gift. Section 17 of the Registration Act, 1908, and Section 123 of the Transfer of Property Act both require that a gift deed be registered with the sub-registrar.

Is registration required?

In the case of immovable property, the donee must accept the gift during the donor's lifetime or the gift will be considered invalid. If the property is to be considered a gift, it must also be registered with the sub-registrar under Section 122 of the Property Transfer Act 1882. As with any other property transfer, it will necessitate the payment of stamp duty and a registration fee, which will vary by state. Furthermore, the donor must be competent and cannot be a minor.

What are the tax implications of a property gift?

According to Section 56(2) of the Income Tax Act, if the total value of gifts received during a year exceeds Rs.50,000, the donee will be taxed under 'income from other sources.' Immovable property will be taxed if the stamp duty value exceeds Rs.50,000. It will only be tax-free if it is received from specified relatives; on the occasion of marriage; as inheritance or through a will; in anticipation of the donor's death; from a local authority; from any fund, foundation, university, educational institution, hospital, or medical institution; or from any trust or institution referred to in Section 10(23C), or from any trust or institution registered under Section 12AA or 12AB.

Gift deed details

The gift deed should include all pertinent information about the donor, donee, and property being transferred. It should also include their signatures and contact information, as well as the signatures of two witnesses who must be present during the property transfer. It is best to have a lawyer draft the gift deed and have the transfer process carried out in the presence of a legal expert.

WHAT ARE THE CHARGES?

To register a gift deed, you must pay stamp duty and a registration fee. Stamp duty rates for property transfers by gift are the same in some states as for sales or conveyance deeds.

However, rules vary by state; some state governments even offer some relief if the property is given to blood relatives. In Delhi, for example, the stamp duty on property transfers by sale or gift deed is the same-4% for men and 6% for women. The stamp duty for a sale or conveyance deed in West Bengal is 5% of the property's market value in panchayat areas and 6% of the market value in municipal areas. In the case of a gift deed, If the property is given to a non-family member, the rate remains the same. If the recipient is a family member, stamp duty is only 0.5% of the property's market value.

Is it possible to revoke or cancel the gift deed?

Once a gift deed has been made, it is typically difficult to cancel or revoke it. Revocation is only possible if the deed contains a relevant revocation clause or the circumstances under which it can be cancelled. According to Section 126 of the Transfer of Property Act, a gift deed can be cancelled or revoked only if the donor and donee agree on the revocation of the deed; if the transfer was based solely on the will of the transferer and the recipient was unwilling to accept it; or if the gift deed was illegally drafted either through coercion or fraud, or if the grounds on which it was drafted were invalid.

 

Points to keep in mind

Once a gift deed for immovable property is executed in favour of any recipient, the donor has no right to revoke or cancel the deed at a later stage, unless the deed expressly states otherwise. The donor has the right to revoke a gift deed under Section 126 of the Property Transfer Act. For example, if the property was given so that the recipient could live in it, upon the recipient's death, the property will be transferred back to the donor if she is still alive, otherwise to the recipient's heirs. Such specifics, however, must be specified in the gift deed.