Gift Deed: Process, Benefits, and Legal Aspects

A gift deed is a legal document used for the transfer of ownership of a property from one person to another as a gift. It is a voluntary act, and the person who gives the gift is known as the 'donor,' while the person receiving the gift is the 'donee.' Gift deeds are commonly used for transferring properties and can be a useful way to pass on assets and wealth.

What is a gift deed

A gift deed is a legal document that allows a property owner to transfer ownership of their property to another person as a gift. It is a voluntary act of giving, and the donee (the recipient) does not have to pay any consideration for the gift.

Key features:

• The transfer happens willingly and without any payment.
• Registration is compulsory according to the Indian Registration Act, 1908.
• Both the person giving and the person receiving must be present during the registration.

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Gift deed format

A gift deed must be executed on non-judicial stamp paper or e-stamp paper, which is available in certain states. The value of the stamp paper would depend on the state in which it is executed and where the property is situated. Each state in India has provisions in respect of the amount of stamp duty payable on the gift deed, and the same would need to be determined based on the specific facts of the case.

Properties transferable through a gift deed

• A gift deed can be used to transfer:
  • Immovable properties: Land, houses, or apartments, but not crops or timber that are growing.
  • Movable properties: Jewellery, vehicles, or cash.
• Conditions for a valid transfer:
  • The person giving the gift (donor) must legally own the property.
  • The transfer must happen immediately, with no conditions or future promises.

Advantages of a Gift Deed

• Legal validity: A gift deed serves as official proof of the transfer, helping resolve any legal disputes that may arise later.
• Tax benefits: It provides tax exemptions in certain cases, especially when transferring property to close relatives.
• Immediate effect: Ownership is transferred right away, unlike a will where transfer happens after death.
• Revocation clause: The donor can cancel the gift deed under specific legal conditions.
• Clear ownership: It clearly establishes the donee’s ownership, preventing future claims or disputes.
• No monetary exchange: The transfer happens without any payment, preserving the nature of a gift.
• Quick and cost-effective: Compared to a sale, transferring through a gift deed is faster and usually involves lower costs.
• Avoids probate: The property does not go through probate, making asset transfer smoother.
• Emotional value: It reflects goodwill and affection by legally gifting assets to loved ones.

These advantages make a gift deed a reliable and efficient way to transfer property or assets legally and with clarity.

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How to revoke a gift deed

To revoke a gift deed, the following conditions must be met, as per Section 126 of the Transfer of Property Act, 1882:

1. Mutual agreement:
   Both the donor (giver) and the donee (recipient) agree to cancel the gift deed. This agreement must be documented and registered to be valid.
2. Revocation clause in the deed:
   If the original gift deed includes a clause allowing revocation, the donor can cancel the gift by fulfilling the conditions specified in that clause.
3. Fraud, coercion, or undue influence:
   The donor can revoke the deed if it was executed under fraudulent circumstances, coercion, or undue influence. The donor must prove these allegations in court.
4. Failure of conditions:
   If the gift was conditional (e.g., the donee must take care of the donor) and the conditions are not fulfilled, the donor may revoke the deed.

The process involves filing a petition in court, presenting evidence, and obtaining a court order to cancel the deed. The court will then decide whether the revocation is justified based on the evidence and legal grounds.

Components of a gift deed

Here are some important things that should be mentioned in the gift deed format:

• The place and date on which the gift deed is to be executed
• Relevant information on gift deed regarding the donor and the donee, such as their names, address, relationship, date of birth and signatures
• Complete details about the property for which you draft a gift deed
• Two witnesses to bear testimony of the gift deed and their signatures

Important clauses in a gift deed

When drafting a gift deed in India, several important clauses must be included:

1. Details of the donor and donee: Full legal names, addresses, and relationships.
2. Description of the Gift: A clear description of the gifted property or asset.
3. Free will and consent: A statement that the gift is made voluntarily without coercion.
4. Transfer of ownership: Confirmation that the ownership rights are being transferred immediately and unconditionally.
5. Consideration clause: A declaration that the gift is made without any monetary exchange.
6. Revocation clause: Conditions under which the gift can be revoked, if applicable.

These clauses ensure legal validity and clarity in the gift deed.

Documents required for gift deed registration

The following documents are required for registering a gift deed:

• 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

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Stamp duty charges on gift deed registration

Stamp duty charges on gift deed registration vary from state to state. The value of stamp duty payable on a gift deed would depend on the specific facts of each case. Information regarding stamp duty payable can be found on state government websites.

Here are the stamp duty charges in major Indian states:

State	Gift deed
Haryana	Rural – 3% Urban – 5%
Delhi	Men – 6% Women – 4%
Karnataka	Family Members - ₹1,000 to ₹5,000
Gujarat	4.9% of the market value
Telangana	Stamp Duty - 5% of market value Registration Fees: 0.5% of the market value
Madhya Pradesh	Family Member – 2.5% of the market value of the property Non-Family Member – 5% of the market value of the property
Maharashtra	Family Members – 3% Other Relatives – 5% Agricultural Land or Residential Property - ₹200
Punjab	For Non- Family Members – 6%
Rajasthan	Women – Up to 4% To Wife – 1% Widow – Nil Immediate Family – 2.5%
Tamil Nadu	Family Member – 1% of the market value of the property Non-Family Member – 7% of the market value
Uttar Pradesh	Men – 7% Women – 6%
West Bengal	Family Member – 0.5% of the market value of the property Non-Family Member – 6% of the market value

Note: Rates may vary based on property location and government updates.

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Who can be a donor/donee in a gift deed?

In a gift deed, the donor is the person who voluntarily transfers ownership of property or assets, while the donee is the recipient of the gift.

• Donor: Any individual who is legally competent to contract, meaning they must be of sound mind and an adult (18 years or older in India). The donor must also have full ownership of the property or asset being gifted.
• Donee: Can be any person, including minors, legal entities like companies, or charitable organizations. However, if the donee is a minor, a legal guardian must accept the gift on their behalf.

This ensures that the gift deed is legally valid and enforceable.

What are tax exemptions on property as a gift

When property is received as a gift in India, it may be subject to tax unless it qualifies for exemptions. Under Section 56(2)(x) of the Income Tax Act, gifts of immovable property are tax-exempt if the property's stamp duty value does not exceed Rs. 50,000. Gifts received from specified relatives, including parents, siblings, or spouses, are also fully exempt from tax, regardless of the property's value. Additionally, gifts received on occasions like weddings or through inheritance are exempt. However, gifts from non-relatives exceeding Rs. 50,000 in value are taxable in the hands of the recipient as "Income from Other Sources."

What is the difference between a gift deed and a will

A gift deed is a legal document used to transfer ownership of property or assets from a donor to a donee during the donor's lifetime, without any exchange of money. The transfer is immediate and irrevocable once the deed is executed.

A will, on the other hand, is a legal document that outlines how a person's assets should be distributed after their death. Unlike a gift deed, a will only takes effect after the testator's death and can be altered or revoked at any time before death.

The key difference lies in the timing and revocability of the transfer.