What is a gift deed and how to execute it

What is a Gift Deed?

A gift deed is a legal document through which a person (the donor) voluntarily transfers immovable or movable property to another person (the donee) without any monetary consideration. Under the Transfer of Property Act, 1882, a gift is defined as the transfer of existing movable or immovable property made voluntarily and without consideration, by one person to another, and accepted by or on behalf of the donee.

Gifts are often made to family members, relatives, or charitable institutions. In property law, gift deeds are commonly used by parents transferring property to their children, or by individuals donating property for religious or charitable purposes. The donor must be competent to contract, and the donee must accept the gift during the lifetime of the donor.

A gift must be accepted by the donee to be valid. Acceptance can be express or implied. If the donee dies before acceptance, the gift is void. Additionally, a gift cannot be made to a person who is not in existence at the time of the gift (such as an unborn child). Our property lawyers at Vidhi Legal Services ensure all gift deeds comply with legal requirements.

Legal Requirements for a Valid Gift Deed

For a gift of immovable property to be valid, several legal requirements must be satisfied. First, the gift deed must be in writing and signed by the donor. Second, it must be attested by at least two witnesses. Third, it must be registered with the Sub-Registrar under the Registration Act, 1908. Failure to register renders the gift deed invalid and inoperative.

The gift must be of an existing property, not a future property. The donor must have a clear and marketable title to the property being gifted. If multiple persons own the property jointly, all co-owners must join in the gift. The gift must also be accepted by the donee, either by signing the deed or through conduct indicating acceptance.

Under the Indian Stamp Act, gift deeds for immoveable property are charged stamp duty at the same rate as sale deeds in most states. This is because the transaction is treated as a transfer of ownership, and the state revenue is protected regardless of whether consideration is paid. Our team at Vidhi Legal Services advises clients on applicable stamp duty and registration charges.

Step-by-Step Procedure to Execute a Gift Deed

The execution of a gift deed begins with drafting the deed on non-judicial stamp paper of appropriate value. The deed must clearly describe the property being gifted, the relationship between the donor and donee, and contain a declaration that the gift is made voluntarily and without coercion. The donor's signature and the attestation of two witnesses are essential.

After drafting, the gift deed must be presented for registration at the Sub-Registrar's office within the jurisdiction where the property is located. The donor, the donee, and two witnesses must appear in person before the Sub-Registrar for the registration. The Sub-Registrar verifies the identities and confirms voluntary execution before registering the deed.

After registration, the donee should apply for mutation of property records to update the government records with the new ownership. The donee should also ensure that property tax records are updated and that any existing encumbrances are cleared. Our legal experts at Vidhi Legal Services provide end-to-end assistance in the gift deed process.

Tax Implications of Gift Deeds

Under the Income Tax Act, 1961, gifts received by an individual from specified relatives are exempt from tax. Specified relatives include spouse, siblings, parents, lineal ascendants and descendants, and their spouses. Gifts received on occasions like marriage or under a will or inheritance are also exempt, regardless of the relationship.

Gifts received from non-relatives are taxable if the aggregate value of gifts received during the financial year exceeds Rs. 50,000. However, this rule applies to gifts of money or property below the stamp duty value. For immovable property, the stamp duty value is considered the fair market value for tax purposes.

The donor may be liable to pay capital gains tax if the gifted property was acquired by the donor and has appreciated in value. However, no capital gains tax is payable if the gift is made to a relative. The donee's cost of acquisition is the same as the donor's cost, which affects the capital gains when the donee eventually sells the property.

Frequently Asked Questions