In India, there are numerous ways to transfer property ownership. Depending on the situation, options include a plain sale, a gift deed, and a relinquishment deed. This article examines the property gift deed in India.
Using a property gift deed is a common method of transferring property ownership.
The Transfer of Property Act, 1882‘s Section 122 states that gifting real estate must be done voluntarily.
It is a better technique than a sale deed since the gift is given to family members. However, to make the transfer legitimate, stamp duty and registration fees must be paid to make the transfer legitimate. This type of transfer is also final. The recipient of a gift over Rs 50,000 given to a non-relative must pay taxes on the amount received.
What is a Gift Deed?
Giving away one’s property also entails using a gift deed to transfer the title to a third party. Consider the financial repercussions before giving a property through a gift deed to a close friend or family member.
Any immovable property that satisfies the requirements of Section 122 of the Transfer of Property Act, 1882 may be transferred via a gift property law or gift deed.
A gift deed must be recorded with the sub-registrar office in accordance with sections 123 of the Transfer of Property Act and 17 of the Registration Act of 1908, just like a sale deed, with the exception that no money is exchanged in the transfer of the property. The contract would only be void if this were done.
When someone wants to offer their money or property to another individual, a gift deed is a legal document that is employed. Using a gift deed, the giver and donee can freely transfer ownership of both moveable and immovable property. A gift deed makes it possible for the owner of the property to donate the property to anyone and resolves any future issues with succession or inheritance.
In contrast to a will, the transfer of property happens immediately. You will also save time by avoiding a trip to court for the gift deed’s execution. Another form of evidence is a registered gift deed.
It’s critical to understand how the word “property” is used in the statute is critical. Property has been given a fairly broad definition, encompassing both real and material items like land and houses and abstract rights like the right to debt repayment that is not exercised over any physical objects.
The Act also uses the word “transfer” in a broad sense. It could refer to transferring the property’s rights and interests or just one or more of the inferior rights. Therefore, the phrase “transfer of property” might refer to the transfer of a debt, one or more rights in a thing, or the transfer of objects themselves.
According to Indian law, a property must satisfy the following conditions to be considered a gift:
- The asset must be either moveable or immovable.
- It must be possible to transfer the asset.
- The house shouldn’t be a future house.
- The asset must be observable.
Selling a gift deed property:
Now arises a question, Can a gift deed property be sold?
The gift giver is referred to as the donor and the recipient as the donee. The gift must be given and accepted during the donor’s and the donee’s lifetimes to be considered legal.
Giving away immovable real estate constitutes a property transfer and must be done in writing through a gift deed. The donor and the donee must sign this document in the presence of two witnesses.
In India, giving away real estate has certain tax and stamp duty. State-by-state, the stamp duty on gift deeds in India can range from 2 to 7 percent of the property’s value. In Maharashtra, it is 3%.
Also Read: Most Recent Property Rates in Mumbai
As long as the gift is legally registered, you are free to sell the real estate however you see fit. It isn’t easy to contest a gift deed registered by a sub-registrar for which the necessary stamp duty has been paid.
Additionally, after you receive the gift deed, you become the legal owner of the property and are free to sell it to anyone using a sale deed.
Gift deed format for immovable property:
The gift deed format for immovable property shall contain the following essential elements or information:
- Location and date of the gift deed’s execution.
- Relevant details about the donor and of whom to donate, including their names, addresses, relationships, dates of birth, and signatures, are included in the gift deed.
- Details in full regarding the property for which you are making a gift deed.
- To verify their signatures and the gift deed, two witnesses are required.
After paying the requisite sum, the gift deed must then be printed on gift deed stamp paper and registered gift deed at the registrar or sub-office. The registrar depends on the value established by the state government.
- A legitimate gift must have five characteristics:
- A change in ownership.
- Existing real estate.
- A transfer without thought.
- Voluntary transfer with unrestricted approval.
- The act of accepting a gift.
The receiver becomes the owner since ownership is transferred by a gift, allowing him to sell the property given to him by a gift deed.
The following key components should be present in the gift deed’s format –
- Neither force nor money is employed.
- When you give something away, you remain the owner.
- What is the property?
- The connection between the giver and the done.
- Mention obligations.
- Delivery provision.
- Taking back the gift.
Legal requirements for Gift deed:
The followings are the basic legal requirements for a gift deed –
- Registering a gift deed is mandatory.
According to the Transfer of Property Act, a registered instrument or document signed by or on behalf of the person gifting the property and attested by at least two eyewitnesses must support the transfer of a residential property as a gift. This means that if one wants to legally bind a property gift, one cannot just decide to do so without following the correct legal process.
- Stamp duty and registration charges need to be paid
When a gift deed is given for registration, the registrar must make sure the appropriate gift deed stamp duty has been applied to the instrument. The stamp duty and registration fees related to a gift deed are typically the same as those related to a regular sale.
- Gifting among relatives
Some states offer stamp duty reductions if the gift deed is between a specific set of relatives. For instance, Maharashtra caps the amount of stamp duty on the gift that must be paid at Rs 200, regardless of the property’s worth, when it comes to gifts of residential or agricultural property to a person’s spouse, children, grandchildren, or wife of a deceased son.
Ways to calculate stamp duty on a gift deed
A gift deed registration fee is also required to make this document legally binding, just like most deeds involving the exchange of property. Some states charge 1% of the property cost as gift deed registration fees, while others impose a flat price.
On gift deed registrations in a state, a portion of the real estate value must be paid as stamp duty. In Uttar Pradesh, the gift recipient must pay a stamp duty equal to 2% of the present’s value. Suppose a gift of the property has a stated value of Rs. 1 crore. The recipient would then be required to pay Rs 20 lakhs in stamp duty on the gift.
In Maharashtra, the tax rate is 3 percent for family members, 5 percent for distant relatives, and 200 rupees for residential or agricultural property.
Canceling gift deed:
But how to cancel gift deed property? Is it possible?
A gift may be returned, but this possibility must be considered and addressed in the registered gift deed. According to Section 126 of the Transfer of Property Act, the agreement cannot be revoked unless the donor expressly states in the registered contract that he retains the right to revoke the gift.
This means that the donor must explicitly state while drafting the gift deed that, even after the deed is completed, the donor will retain the right to revoke the deed and take the gift back from the donee if and when he chooses.
Once the property has been legally given away, it belongs to the donee and cannot be withdrawn. However, under certain conditions, revocation of a gift deed may be permitted, as per Section 126 of the Transfer of Property Act, 1882:
- If deception or coercion was used to obtain the gift deed.
- If it is found that the reasons for the donation deed were unethical, illegitimate, or repugnant.
- If it was agreed from the start that the gift deed could be revoked in specific situations.
Property gift deeds between non-relatives are not legal under Indian law. This presumption is founded on the idea that the owner would demand payment from an unfamiliar party. It is legitimate if a gift deed is properly executed and the transferor is the property’s sole and legal owner.
Another prerequisite for the gift deed to be genuine is that no judicial orders should stand in the way of the transfer.
Frequently Asked Questions:
1. How long is the validity of a gift deed?
As long as the donor is alive, a gift deed that has been made will always be valid.
2. Is money transfer possible in a gift deed?
Creating a gift deed can give your relative cash or a bank account balance. Amounts above Rs. 50,000 in the total amount of cash gifts received without request during a fiscal year (FY) are taxable to the recipient as other income.
3. Is cancellation possible for the gift deed?
Yes, you may cancel it. However, unless the gift deed was secured through fraud, coercion, deception, or undue influence from the giver, it cannot be rescinded.