Gifting of Property in India

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Understand the property gift deed rules in India as it pertains to the doner, done and gifts to minors. Get expert guidance by top property lawyers on LawRato. “ Gift” is the transfer of property from one person to another, where the transferor gives such property to the receiver, willingly, without any compensation/favor in return.

The term “ Gift” is considered as property from one person to another, where a willingly person gives a gift, such as property to the receiver without expecting favor or compensation in return. This blog describes what is gift deed in India as well as the property gift deed rules. 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 the details of the property, the transferor, and the recipient. But unlike a sale deed, it allows one to transfer ownership without any exchange of money.

A gift deed is a legal document that describes the voluntary transfer of a gift from a donor (owner of the property) to the donee (receiver of gift) without any monetary favor in return. The donor should not be insolvent and should not use this as a tool for evasion of tax and illegal gains.

Registering a gift deed with the sub-registrar is mandatory under the laws in India (Section 17 of the Registration Act, 1908 and Section 123 of the Transfer of Property Act.) If this is not done, the transfer will be invalid. Once a gift deed is registered, only then the change in the title of ownership of property is possible. Also, for the recipient to be able to further transfer the property, a registered gift deed will be required.

WHAT CAN BE GIFTED?

A gift is the transfer of any existing moveable or immovable property, according to Section 122 of the Transfer of Property Act. These transfers have to be voluntary. The donee is the recipient of the transfer the transferor is referred to as the donor. The donee has to accept the gift. The transfer of both moveable and immovable property is covered under the definition. This description covers the property gift deed rules. The following conditions should be fulfilled for a property to be a valid gift:

1. It should be movable or immovable property.

2. It must be transferable.

3. It should be an existing property and not a future property.

4. It should be tangible or real.

5. The transferor and the receiver should be alive at the time of the gift. If you want to read more about property law in the country, visit Property Law Guides.

ESSENTIALS FOR A VALID GIFT DEED

According to the property gift deed rules, a gift deed must be specific and contain all the necessary components for transferring the property. It is best to have a lawyer create the deed for you as they are well-versed in the law, LawRato can connect you with experts in the field. Click here for all you need to know about the transfer of property. The following requirements must be met for a gift deed to be carried out properly:

1. The gift deed should essentially mention the details of the property that is being gifted.

2. Details of the recipient/receiver are also essential.

3. The deed must be signed by the donor i.e. the person gifting the property.

4. Both the donor and receiver must be present in the office of the Registrar.

5. The document must be signed by at least 2 witnesses.

6. The deed needs to be stamped with an appropriate non-judicial stamp, depending upon the value of the property.

Consult: Top Property Lawyers in India

WHO CAN MAKE A GIFT DEED?

A person who owns the property can make a gift to another person. An exception to this rule is the case in which either the donor or the donee is a minor. The property owner can give something as a gift to someone else. When a minor is involved (either the donee or the donor) this rule is not applicable. Minors are not allowed to sign contracts, hence according to the property gift deed rules, they cannot gift a property. The gift deed is null and void if there is a minor involved.

Having understood the concept of a gift deed in India, it's crucial to recognize that if the donee is a minor, acceptance of the gift may be done by a natural guardian of the minor. This guardian supervises the property in a managerial capacity. In cases where the gift is onerous, enforcement upon the donee is not permissible until they reach adulthood. Subsequently, the donee, upon attaining maturity, must decide whether to accept or return the gift.

The guardians who can receive the gift on behalf of the minor or insane persons are:

1. Father

2. Father's executor

3. Paternal grandfather

4. Paternal grandfather's executor

PROCEDURE TO GIFT A PROPERTY

The procedure to gift a property can be sub-divided into three steps mentioned below:

1. Drafting the Gift Deed & ndash A gift deed ensures a legal transfer of the gift and should be drafted with the help of a lawyer. It describes what is being transferred, who is transferring the property, and to whom. It is a contract between the donor and the donee where the donor is willingly giving his property to the donee and he/she accepts the property. It is essential that A gift must be made by a person voluntarily and not under any compulsion, and without any exchange of money or any other consideration.

2. Acceptance & ndash Acceptance of the gift deed is another important legal requirement and the donee must accept the gift during the lifetime of donor. In case the donee fails to accept the gift, it becomes invalid. The acceptance may be validated by acts of the recipient such as taking possession of the property. The Supreme Court ruled in the Gomtibai v. Mattulal case that a gift of immovable property is incomplete if it isn't accompanied by a written deed signed by the donor, two witnesses attesting to it, registering it, and the donee accepting it.

3. Registration & ndash As per Section 123 of the Transfer of Property Act , a gift of immovable property cannot pass any title to the donee unless it is registered. It is mandatory to get it attested by two witnesses during and post-registration. If you have any further queries, you can visit LawRato and read the procedure for gifting of the property thoroughly.

REGISTERING A GIFT DEED

As stated earlier, a gift deed , transferring a property from the donor to the donee is required to be registered. This is to be done at the office of the registrar with the help of a lawyer. Registration validates the transfer. Click here to know all about family dispute over property. Following are some common steps required for the process of registration:

1. Valuation of gift property by an approved valuation expert.

2. Stamp duty and transfer duty are to be paid & ndash It varies from state to state and according to the type of property. Stamp duty is also lesser for women than for men. The latest rates of stamp duty can be found on the relevant official/government website.

Registration Fee and Stamp Duty for Gift Deed

The stamp duty and the registration fee for the gift deed vary from state to state. In order to calculate the stamp duty and the registration fee, it is advisable to consult a local lawyer. The charges for some major cities are listed below:

New Delhi - In Delhi, the stamp duty and transfer duty is payable @ 4% if the donee is a woman and @ 6% if the donee is a man. The registration fee is 1% of the total market value of the property plus Rs.100/- pasting.

Bangalore - In Bangalore, the stamp duty and registration charges depend upon who is gifting the property:

1. If the donee is not a family member, then the stamp duty will be payable @ 5% along with surcharge and cess. The registration fee is 1% of the total market value of the property.

2. If the donee is a family member, then the registration fee will be Rs 1000, and the stamp duty:-

• If the property is situated within BMRDA/BBMP/ City Corporation limits, the stamp duty will be Rs 5000 along with surcharge and cess.

• If the property is situated within city/town/municipal/council/town panchayat limits, then the stamp duty will be Rs 3000 along with surcharge and cess.

• If the property is situated within the limits other than the places mentioned in (i) and (ii), the stamp duty will be Rs 1000 along with surcharge and cess.

Mumbai - In Mumbai, the stamp duty and registration fee differ as per the type of property that is gifted, such as:-

1. In the case of agricultural and residential land, the registration fee is Rs 200 and the stamp duty is Rs 100, where 1 % is the LBT of the total market value of the property.

2. In case of any immovable property which is given to a family member, stamp duty is 3% of the market value of the property along with 1% registration fees. If a person other than the family member is giving the property, then in that case the stamp duty will be 5% of the market value of the property along with 1 % registration fees.

Chennai - The registration fee for the gift deed in Chennai is 1% of the property's market value and the stamp duty for the gift deed is 7% of the market value of the property.

Kolkata - In Kolkata, the values of the registration fee and the stamp duty differ, based on who is gifting the property.

1. When the gift deed is made by a family member, the stamp duty is 0.5% of the market value of the property.

2. When a gift deed is made by a person other than a family member:

• If the property is situated in the Panchayet Area, then the stamp duty will be 5% of the total market value of the property.

• If the property is situated in Municipal Areas, Corporation Areas, then the stamp duty will be 6% of the market value of the property.

• If the market value exceeds 40 lakh in both urban and rural areas, then additional stamp duty of 1% will be charged.

This fee can be paid through demand draft, cheque, or cash at the office of the sub-registrar. The property laws of each state are different hence it is best to get a lawyer who is well versed with the laws to clear all your doubts. You can find a lawyer through LawRato in your state who will only be recommended to you after verification.

Consult: Top Property Lawyers in India

Documents Required for Registration of Gift Deed

Certain documents such as:

• Original gift deed.

• ID proof like Aadhaar Card, Driving License among others.

• PAN card of the donor and donee.

• Document such as a sale deed or title deed to prove the ownership of the donor.

• Passport size photograph.

• ID proof of the witnesses.

Duration of the Process of Gift Deed

According to Section 23 of the Registration Act, 1908 a gift deed should be presented before the officer within 4 months from the date of its execution. The final registration process takes at least 1- 3 weeks of the time period.

TAX PAYABLE ON THE GIFT

Previously, there existed the Gift Tax Act under which a donor had to pay & lsquo gift tax' on the amount of the gift. However, this Act has been abolished, and from Financial Year 2004-05, a new provision has been inserted in the Income Tax Act, 1961 . According to this, if the gift is received in the following situations, it will not be taxable:

• When an individual receives a gift from a relative/blood relative

• When an individual receives a gift from any person on the occasion of that individual's marriage

• When an individual receives a gift from any person under a will or by way of inheritance When any person receives a gift from an individual in contemplation of the death of a donor or payer

• When any person receives a gift from any local authority, Panchayat, Municipality, or, from any fund or foundation or university, educational institution or hospital, or from any registered charitable or religious trust, etc.

• When any fund or trust or institution or the educational or medical institution receives a gift from any person

• When members of HUF receive a gift from the HUF on the occasion of distribution of capital assets on the total or partial partition of a HUF

• When a trust (created solely for the benefit of a relative of the individual), receives a gift from that individual

However, excluding the aforementioned exemptions, certain gifts received by any person from another, attracts gift tax. Mostly, if the aggregate of gifts received exceeds Rs 50,000 in a year, the gift will be taxable as income from another source.

FAQs: Gifting of Property In India

Q. Who is a donor?

A. The person gifting a property is known as the donor. Q. Who is a donee?

A. The person receiving a gift, or the transferee is called a donee. Q. Is there any income tax liability upon a Hindu Undivided Family (HUF) on a Gift made to the HUF by a member of the HUF?

A. A Gift made to a HUF by a member of the HUF is exempted from the income tax liability.

Q. Is registration of a gift deed mandatory?

A. Registering a gift deed is mandatory as per Section 17 of the Registration Act, 1908 and as per Section 123 of the Transfer of Property Act. A gift deed would be invalid if not registered. Q. Apart from marriage, is there any other occasion in which gifts will not be charged for tax?

A. According to the Income Tax Act, 1961, if the gift is received in the following situations (apart from marriage), it will not be taxable:

• When an individual receives a gift from a relative/blood relative

• When an individual receives a gift from any person under a will or by way of inheritance

• When any person receives a gift from an individual in contemplation of the death of a donor or payer

• When any person receives a gift from any local authority, Panchayat, Municipality, or, from any fund or foundation or university, educational institution or hospital, or from any registered charitable or religious trust, etc.

• When any fund or trust or institution or the educational or medical institution receives a gift from any person

• When members of HUF receive a gift from the HUF on the occasion of distribution of capital assets on the total or partial partition of a HUF

• When a trust (created solely for the benefit of a relative of the individual), receives a gift from that individual

  Consult: Top Property Lawyers in India

Q. Is revocation of a gift possible?

A. The deed can be revoked only under the following conditions:

• If there is a mutual agreement between the donor and the donee.

• If the property transfer was not accepted by the donee.

Q. Can a gift be conditional?

A. Unless the condition is prohibited under any other law in force, there can be a conditional gift. However, the condition should not be based on the mere will of the donor. Q. Do we need to pay tax on gifted property in India? A. Yes, if the combined value of gifts received during the year exceeds Rs. 50,000. However, gifts between specified relatives are exempted from tax up to a certain limit. Q. Can the son gift property to the mother? A. Yes, a son can gift property to his mother or vice versa. Gifting between blood relations is allowed without any legal restrictions. Q. Which is better, a will or a gift deed? A. A will is a cost-effective option as it does not involve stamp duty payments and comes into effect after death where the individual is allowed to specify asset distribution. On the other hand, a gift deed transfers ownership immediately and is irrevocable upon execution and helps in avoiding legal disputes among family members by distributing assets during the donor's lifetime, unlike in the case of a will. Q. What property cannot be gifted? A. Properties that cannot be gifted are future property and undivided ancestral property. A future property is not in existence at the time of gifting and cannot be gifted. An undivided ancestral property's shared ownership restricts gifting. Q. What is blood relation for the gift deed? A. “ Blood Relation” is the familial connection between the donor and the donee that refers to individuals who share biological ties, including parents, grandparents, siblings, children, and grandchildren. This encompasses gifts from father to son, mother to son, sister to brother, mother to daughter, between brothers, husband to wife, and father-in-law to a widowed daughter-in-law. Q. How to transfer property title between family members? A. Apart from a Gift Deed, other options to transfer property title between family members include a Relinquishment Deed where one member surrenders their share, Jointly owned properties can use Partition or Settlement Deeds for division, and Inheritance or Will Deeds enable property to be bequeathed. Q. Who can gift property to whom in India? A. A property can only be gifted by a sound donor, who is not a minor and legally owns the property, to blood relations or even unrelated individuals who are capable of owning property. Q. What are the benefits of gifting property? A. Gifting property provides tax benefits, including capital gains tax reduction and income tax deductions. Additionally, the donor can set up arrangements for receiving lifelong income or retain the right to live in the gifted property. Q. Can property received by gift deed be sold? A. Yes, property received by a gift deed can be sold. It must be noted that such gift deeds must be registered without any attached conditions or terms that are restricted by the law being in force. However, in case of a conflict leading to deed cancellation, the recipient loses the right to sell the property. Q. Can gift deeds be challenged? A. A gift deed can be challenged based on certain grounds. It may arise if the donor's consent was not free, if the deed was not executed and registered as per legal requisites, or if either party lacked contractual capacity. In the case of a conditional gift, if any such conditions or terms are not fulfilled by recipients or include considerations within the gift then the deed can be challenged. Q. Can I gift a property to my friend? A. Yes, you can certainly gift a property to your friend or any individual, provided that such a deed should specify property details and friend's information, signed by the donor, and witnessed by at least 2 individuals. Q. Is a gift deed applicable after death? A. A gift deed is applicable after the death of the donor, subject to certain conditions. The property, free of conditions, can be sold after lawful registration and tax payment. However, acceptance by the donee has to be made in the lifetime of the donor. Q. What is the difference between a gift deed and a will?

A. There are various differences between a gift deed and a will such as:

• It is important that the recipient must accept the gift in order to validate the gift deed. However, no such acceptance is required in a will, although a person can relinquish his rights after the execution.

• A gift deed is registered within the lifetime of the donor and if the donor dies before the acceptance of the gift deed, the gift deed becomes void. A will, however, is executed only after the death of the testator.

• ?A will can always be revoked during the lifetime of the testator, but a gift deed once registered cannot be revoked.

To learn more read the law guide on Gifting of Property in India . You can also ask for free legal advice through LawRato, and these queries will be answered by the top legal experts pertaining to your case.

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Advocate Chikirsha Mohanty

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