Can a Gift Deed be challenged in India?

What is a Gift Deed?

According to section 122 of the Transfer of Property Act, 1882 , you can transfer immovable property through a gift deed . Like a sale deed, a gift deed contains details of the property, the transferrer, and the recipient. But it allows you to transfer ownership without any exchange of money. Registering a gift deed with the sub-registrar is mandatory as per section 17 of the Registration Act, 1908, and as per section 123 of the Transfer of Property Act. If you don't do this, the transfer will be invalid.

Besides that, once a gift deed is registered in the name of the recipient, only then can she/he apply for mutation of the property. The mutation is necessary to transfer utility connections in the name of the recipient. Also, for the recipient to be able to further transfer the property, a registered gift deed will be required.

Can a Gift Deed be challenged?

The gift deed can certainly be questioned in the court of law by filling a suit for such declaration. However, it will be challenged only if you are able to establish that the execution of the deed was not as per the wish of the donor or was executed under misrepresentation, fraud, etc. Some grounds on which a gift deed can be challenged are stated below: 1. If the consent for the transfer of gift was not free, 2. If the gift deed was not executed and registered as per the legal requirements, 3. If either party to the gift was not competent to contract, 4. If the gift is conditional and the condition is not fulfilled by the recipients. In such a case, the gift deed can be revoked. 5. If the gift deed includes any consideration for the gift, such gift deed would not be valid.

What is the Suit of Declaration?

A & quot Declaration& quot is a legal pronouncement by a court of law in respect of a person's right to property or his status. Any person entitled to any legal character, or to any right to a property may institute a suit against any other person denying or interested to deny, his title to a such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such a suit ask for any further relief.

The Suit for declaration is to declare a right of the party/plaintiff and when the right is about the property, the suit is for declaration of title/ownership and also for recovery of possession.

What is the procedure for revocation of a Gift Deed?

Section 126 of the Transfer of Property provides for conditions where a gift can be revoked. the following are essential ingredients for revocation of a gift :

• there must be an agreement between the donor and donee that the gift shall be suspended or revoked on the happening of a specified event

• such an event must be one that does not depend upon the will of the donor

• the condition as to the suspension or revocation should be agreed to by the donee at the time of accepting the gift. And,

• there must exist a ground, except want or failure of consideration, on which a contract may be rescinded.

• the condition should not be illegal, or immoral and should not be repugnant to the estate created under the gift.

• Section 126 is controlled by sec. 10. As such, a clause in the gift deed completely prohibiting alienation is void in view of the provisions contained in sec. 10.

• A gift, which was not based on fraud, undue influence, or misrepresentation nor was an onerous one, cannot be canceled unilaterally. Such a gift deed can be canceled only by resorting to legal remedy in a competent court of law.

Major Clauses in a Gift Deed

1. The names, addresses, and relationships of the donor and donee shall be set forth in the gift deed for the property. It should be made clear that the property is being transferred as a result of & quot love and devotion,& quot with no other kind of compensation being used to make the transfer possible.

2. The property's gift deed should specifically say that the donor is giving the donee ownership of the property on a free and voluntary basis. It is important to note that this transfer has not entailed any threats, coercion, or intimidation.

3. The gift deed must explicitly state that the donated property is real, belongs to the donor alone, and is being transferred to the recipient of the gift.

4. The gift deed must properly contain a detailed description of the property being gifted.

5. The rights provided to the donee over the property must be specified in the donation deed. This ought to include the donee's right to dispose of, mortgage, or lease the property as they see fit.

6. The property should be explicitly acknowledged as having been accepted by the donee in the gift deed.

7. The purpose of the donor to transfer ownership of the property to the donee must be expressed expressly or indirectly in the gift deed.

8. The names and addresses of at least two witnesses must be listed on the gift's paperwork. The donation deed must be signed and attested to by these witnesses.

It's crucial to remember that a revocation clause is not required to be included in the gift deed.

Gift Deed Registration

A Gift Deed is only regarded as legitimate under the Transfer of Property Act of 1882 when it has been registered. The donee's signature, the donor's signature, and the testimony of two witnesses are all required for registration. A Gift Deed must be properly registered with the registrar's office in order to be enforced. This procedure comprises writing down the necessary provisions on a stamp paper and paying the necessary stamp duty, the amount of which varies by state. Notably, the donor's residence determines the registrar's authority with regard to movable property.

The Documentation Needed to Register a Deed of Gift

The Registrar's or Sub-Registrar's office is where gift deed registration is done. Several important identity and property documents, including the following, are required to complete the registration process:

• Original Gift Deed

• Identification documents include a driver's licence and an Aadhar card, among others.

• Both the donor's and the donee's PAN cards

• documentation proving the donor's ownership, such as a sale deed or title deed

• passport-sized images

• proof of the witnesses' identities

• Address of the witness

Income Tax on a Gift Deed

It's crucial to keep in mind that gift deeds must be recorded on your income tax returns (ITR) when registering them. Despite being repealed in 1998, the Gift Tax Act of 1958 was brought back in 2004. You can be subject to taxation if you obtain an immovable property through a gift deed that has a stamp duty value greater than 50,000 without acceptable consideration. The difference over 50,000 may be taxed if the consideration is 1.5 lakhs but the stamp duty is 4 lakhs. If the property's stamp duty exceeds 50,000 and the gift deed lacks actual consideration, it may be liable to taxation, especially for immovable assets valued at or above 50,000. Gift deeds must be mentioned in your ITR. When a relative gives you a property they once possessed, as well as when you sell the property, there are tax events. The holding time affects the taxation. Indexation and possibly capital gains tax exemption are possible while holding for more than 36 months. Gains made in the short term are contributed to your ordinary income, though they may be given special investment treatment if held for less than 36 months.

Charge for Gift Deed Registration

Depending on the value of the property, different states have different registration laws and costs. Depending on the documentation and legal backing, legal fees for gift deeds might range from Rs 3,000 to Rs 25,000. Typically, registration fees are either a flat rate or a 1% property value fee. Delhi levies a 6% male and a 4% female fee. Gift deeds are subject to a 5% stamp duty fee, sale deeds a 7% fee, and exchange deeds an 8% fee in Haryana. Giving specific relatives residential or agricultural land in Haryana or Maharashtra will cost you between Rs. 100 and Rs. 300 in stamp duty, with rural areas paying less.

Can a Gift Deed be challenged?

The gift deed can certainly be questioned in the court of law by filling a suit for such declaration. However, it will be challenged only if you are able to establish that the execution of the deed was not as per the wish of the donor or was executed under misrepresentation, fraud, etc. Some grounds on which a gift deed can be challenged are stated below: 1. If the consent for the transfer of the gift was not free, 2. If the gift deed was not executed and registered as per the legal requirements, 3. If either party to the gift was not competent to contract, 4. If the gift is conditional and the condition is not fulfilled by the recipients. In such a case, the gift deed can be revoked. 5. If the gift deed includes any consideration for the gift, such gift deed would not be valid.

What are the grounds for challenging a Gift Deed?

A gift deed may be revoked at any time by the donor if they change their mind. It is possible to contest the deed in court via the declaration of a gift deed litigation. The donor must be able to show that the donation was accepted against their will and that it was done so via undue influence or deception The only grounds when a gift deed may be revoked is if any of the crucial legal prerequisites for a legitimate gift transaction have not been satisfied, such as:

• Not Giving Free Consent

• Missing the deadlines for execution and registration

• Presence of Consideration

• Parties Incompetent to Contract

• Acceptance is not there

Additionally, the gift deed may be revoked if a conditional gift is given but the condition is not met.

What is the Suit of Declaration?

A & quot Declaration& quot is a legal pronouncement by a court of law in respect of a person's right to property or his status.Any person entitled to any legal character, or to any right to a property may institute a suit against any other person denying or interested to deny, his title to a such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such a suit ask for any further relief. The Suit for declaration is to declare a right of the party/plaintiff and when the right is about the property, the suit is for declaration of title/ownership and also for recovery of possession.

Who can file a Gift Deed Cancellation?

Only the donor has the authority to cancel a Gift Deed, and only then when the donor has a good reason to do so. A gift is final after it has been acknowledged by the donee.

What are the Grounds for Cancellation of Gift Deed?

A gift deed may be revoked for the following reasons:

Deceptive Act: The Gift Deed may be revoked under Section 19 of the Indian Contract Act, 1872, as it is deemed voidable if the donor's permission was obtained via fraud and dishonesty

Mutual Agreement: The Gift Deed may be cancelled if the donor and donee concur on the cancellation for a particular reason.

Revocation: The Gift Deed may be withdrawn in accordance with an agreement made between the donor and donee under certain specific situations. Importantly, gifts covered by a Gift Deed must be withdrawn within three years of the donor becoming aware of the necessity for cancellation. A Gift Deed cannot be unilaterally revoked.

Title Remains with Donor: During this period, the title to a gift deed remains with the donor, allowing for possible cancellation. This is true if the gift was not accepted during the donor's lifetime, the gift deed was not registered, the stamp duty payment was insufficient, the donee failed to sign it, the donee rejected it, or the gift was not accepted during the donor's lifetime.

Forgery: The cancellation procedure may be started if it is determined that the Gift Deed was forged. If the relevant conditions are satisfied, the Transfer of Property Act of 1882 and the Indian Contract Act of 1872 both provide cancellation in instances of forgery. A crucial step in this procedure is the registration of the gift deed.

How to Cancel a Gift Deed?

• Draft a petition and submit it to the court to start the procedure. Indicate in this petition exactly which clauses the cancellation of the deed is justified by.

• Following the filing of the petition, the court will send notices to the donor and any pertinent parties informing them of the proceedings.

• In order to prove their case for cancellation, the petitioner must provide supporting paperwork, which may include records, witnesses, and other types of evidence. The court will arrange hearings to take into account arguments from both sides and assess the offered proof. The Gift Deed will be revoked by the court if it decides that the grounds for cancellation are legitimate.

• The petitioner may acquire a certified copy of the judgement following the court's judgement. The registration office where the Gift Deed was first registered should thereafter get this copy. The Gift Deed will then be expunged from the registration office's files.

• What is the Court Fee for Cancellation of a Gift Deed?

• The court fee for a lawsuit seeking the declaration of a claimed Gift Deed as void in accordance with the Tamil Nadu Court Fees and Suits Valuation Act, under section 25(b), is typically one-half of the market value of the property in question.

What are the Limitations of Gift Deed Cancellation?

A plaintiff seeking to revoke a gift deed has three years from the time they become conscious of the grounds for revocation under Article 59 of the Limitation Act, 1963. The Limitation Act's Section 5 allows them to ask for a time extension after this point. The cancellation of a Gift Deed and recovering possession, even with a delay justification, are subject to a maximum 12-year time limit set forth in Articles 64 and 65. It's important to note that no third party may participate in the cancellation of a gift deed only the giver and donee may.

Supreme Court Judgement on Cancellation of a Gift Deed

It has been established in numerous court cases that gifts that are given freely cannot be retracted by the donor. Conditions outlined in a gift deed that were mutually agreed upon by the donor and donee are acceptable, nonetheless, and they can serve as justification for withdrawing the gift. In the 1995 case of Mool Raj v. Jamna Devi, the court determined that while restrictions set forth in separate, mutual agreements can serve as justification for revocation, unconditional gifts are not revocable. In the case of Thakur Raghunath Ji Maharaj v. Ramesh Chandra (2001), the court upheld the legality of gift deed conditions. The Supreme Court determined in S. Sarojini Amma v. Velayudhan Pillai Sreekumar (2018) that the terms of the deed prevented a completed gift from occurring, allowing the appellant to revoke it. A Supreme Court decision states that mutually agreed-upon cancellation of Gift Deeds must be made explicit and cannot be relied solely on wishes. Furthermore, a registered Gift Deed's cancellation may be reversed in accordance with the Senior Citizen Act of 2007. There is a maintenance tribunal in every state where elderly people can bring claims to reclaim their property.

What are a Gift Deed and the essentials to make it valid?

There are some things that are essential to make a gift deed valid, these are-

• Property must be an existent estate, whether it be moveable or immovable.
• It is essential that the gift be accepted otherwise, the Gift Deed is void during the donee's lifetime.
• A donor must be at least 18 years old and mentally competent children are not permitted to donate, but they may take gifts through a guardian.
• To take maximum advantage of a Gift Deed's enforcement, the donor should be informed that it may be revoked.
• The gift must be offered freely and the requirements attached must be wilfully met in order for it to be considered genuine.
• The donation deed must be made voluntarily, without the use of fraud or coercion.
• The Indian Registration Act of 1908 mandates that the Gift Deed be registered.

Termination of Gift Deed

A gift deed may be revoked on a number of legal grounds. To do so, complete documentation must be offered in order to retrieve the gifted item. Parties to the gift deed may insert a revocation clause that specifies the requirements for revocation of the gift. This can be used as a way to clear up any future misunderstandings or give the donor an easy way to retrieve the property. If the donee declines, the donor may consult an attorney and maybe bring a lawsuit. A Gift Deed may also be terminated if the title transfer is still pending after registration, in which case the Gift Deed will no longer be valid according to the law.

How can a lawyer help in executing a gift deed?

A gift deed being a legal document requires the supervision of a legal expert for the purpose of drafting and executing. A documentation lawyer , owing to his years of experience in handling gift deeds, can guide you through the procedure of drafting and registration of the same. He can get the gift deed drafted on your behalf and can ensure that your other rights or assets are not affected by executing a particular deed. He can make sure that all the legal formalities are fulfilled while gifting property and no legal harm is done to the transferor during the transaction. You can also use LawRato's Free Legal Advice service to get free advice on your case from expert property lawyers.

Advocate Chikirsha Mohanty

4.0 | 2+ user ratings Greater Kailash - 1, Delhi
5 years

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