Gift Deed

What Is a Gift Deed?

A gift deed, as defined in Section 122 of the Transfer of Property Act, 1882, is a legally binding written document through which the donor voluntarily transfers an existing movable or immovable property to the donee. It is essential to note that a gift deed is only valid when given ‘without any consideration’ in return by a family member or friend to another. According to Section 17 of the Registration Act of 1908, if the transfer involves immovable property, a registered gift deed is mandatory.

Clauses in a Gift Deed Registration Online Format

Contributor and Donee Proof:
- The gift deed must specify the names, addresses, and relationships of the donor and donee. It should explicitly state that the transfer is made out of ‘love and devotion’ without any other form of payment.
Voluntary Transfer:
- It should affirm that the donor is freely and willingly transferring ownership of the property to the donee without any coercion or pressure.
Proprietor of Property:
- The deed should confirm that the donor solely owns the property being gifted and is transferring it to the recipient.
Property Specifications:
- A detailed description of the gifted property must be provided in the deed.
Rights of the Donee:
- The deed should outline the rights of the donee, including the authority to sell, encumber, or lease the property.
Acceptance by Donee:
- It should be confirmed within the deed that the donee has accepted the gift.
Delivery:
- The deed must explicitly or implicitly indicate the intention to transfer ownership of the property.
Witnesses:
- Names and addresses of at least two witnesses should be included, and the document must be signed and witnessed by them.
Revocation:
- While not mandatory, the deed may contain a revocation clause for the gifted property.

These clauses ensure the validity and enforceability of the gift deed, protecting the interests of both the donor and the donee.

Tax Implications of Gift Deed Registration

Gifts given post 1st April 2017 are taxable under Section 56(2)(x) of the Income Tax Act, 1961. If an individual receives a gift exceeding ₹50,000 without any consideration, it is taxable under ‘Income from other sources’ in the donee’s hands, as per Section 56(2)(x)(a).

When receiving an immovable property as a gift and its stamp duty value surpasses ₹50,000, Section 56(2)(x)(b) deems the stamp duty value taxable for the donee. However, exemptions from taxation apply in the following cases:

Gifts from relatives
Gifts received in connection with marriage
Gifts received through a will, inheritance, or due to the donor’s demise
Gifts from a local authority, as defined in Section 10(20) of the Income Tax Act
Gifts from a fund or trust listed under Section 10(23C) of the Income Tax Act, or from a university, foundation, or institution of higher learning
Gifts from a trust or organization permitted to conduct business under Section 12A or 12AA
Gifts received from a trust established solely for the benefit of the donee’s relative

Income Tax on Gift Deed

Gift deeds must be declared in the Income Tax Returns (ITR). Although the Gift Tax Act of 1958 was abolished in 1998, it was reintroduced in 2004. Consequently, if an immovable property is received through a gift deed and its stamp duty value exceeds ₹50,000 without adequate consideration, taxes may apply. For instance, if consideration is ₹1.5 lakhs but the stamp duty amounts to ₹4 lakhs, the difference exceeding ₹50,000 may be taxed.

Advantages of Gift Deed Registration

Simple registration process when both parties consent
Registered gift deeds are immune to litigation
Gift deed property transfers are exempt from tax obligations.

Types of Properties That Can Be Gifted

Property with Movable or Immovable Nature
Tangible Property
Property Eligible for Transfer
Existing Property

Documents Required for Registration of Gift Deed

To register a property donation deed, the following documents are necessary:

Original donation deed with signatures
Identification documents for the donor and donee, such as copies of passports and licenses
Sale deed or other records demonstrating the donor’s ownership of the property
Additional court orders or documents proving the worth of the property

What Is a Gift Deed?

Eligibility for Gift Deed Registration

For a Gift deed to be considered valid, the following conditions must be met:

The donor must be mentally competent to create a valid gift deed.
The donor cannot be a minor under the law.
The recipient of the gift can be a minor, but only with a natural guardian as a nominee.
The guardian will manage the property until the recipient becomes an adult.
The beneficiary must be alive for the gift deed to be valid.
The property being gifted must be an existing movable or immovable property owned by the donor.
No monetary exchange should be involved in the gift deed.
Onerous property cannot be transferred to a minor through a gift deed.
Both the donor and the recipient must be willing parties and should not be coerced into the gift transfer.

Gift Deed Format

Who can be a Donor/Donee?

A donor is someone who gives something, such as money or property, to another person or organization. The donee is the individual or entity who receives the gift. In India, anyone can act as a donor as long as they are of sound mind and have the legal capacity to make a gift. There are no age restrictions on donors. However, there are limitations on who can be a donee. For example, minors cannot be recipients of property gifts.

Types of Donors:

Individual donors: Individuals who donate money or property to charities or other organizations.
Corporate donors: Businesses that donate money or property to charities or other organizations.
Foundation donors: Foundations that donate money or property to charities or other organizations.
Government donors: Governments that donate money or property to charities or other organizations.

Types of Donees:

Charities: Organizations dedicated to helping others.
Non-profit organizations: Entities not aimed at making a profit and dedicated to specific causes.
Government organizations: Entities run by the government providing services to the public.
Individuals: Individuals receiving gifts from donors.

Considerations When Making a Gift

Purpose of the gift: Determine the objective of the gift, whether it’s to aid a charity, a non-profit organization, or an individual.
Value of the gift: Assess the worth of the gift.
Tax implications: Understand the tax consequences associated with the gift.
Legal requirements: Ensure compliance with legal requirements for making the gift.

It’s crucial to consult with a lawyer to ensure the proper execution of the gift and adherence to the donor’s intentions. Trademarkwala experts can provide guidance throughout this process.

Process of Transferring a Property via a Gift Deed

Drafting the Gift Deed: Agree on the terms of the gift deed, including property details, and sign it in the presence of two witnesses who are not beneficiaries.
Pay the Stamp Duty: Stamp the gift deed with the appropriate duty as per state laws, based on the property value.
Register the Gift Deed: Submit the registered gift deed to the Sub-Registrar, who verifies the parties’ identity and property details before registration.
Obtain the Registered Gift Deed: Once registered, obtain a copy from the Sub-Registrar’s office.

Gift Deed Registration Process

A gift deed is a legal instrument facilitating the transfer of property ownership from one person to another. In India, the registration process for a gift deed is straightforward and involves the following steps:

Visit the Sub-Registrar’s Office: The donor and recipient must visit the office of the sub-registrar together.
Provide Proof of Identity and Residence: The donor should furnish proof of identity, such as a passport or Aadhaar card, while the recipient needs to provide proof of residence.
Fill out Paperwork: Both parties must complete the necessary paperwork.
Sign in Front of Witnesses: The paperwork should be signed by both parties in the presence of two witnesses.
Pay Registration Fees: Upon completion of paperwork, the registration fees must be paid. Fees vary across states.
Submission of Documents: Submit the completed paperwork along with the payment receipt to the sub-registrar’s office.
Registration: Once registered, the gift deed becomes legally binding and irreversible.

Gift Deed Registration Charges/Fees

Several factors contribute to the gift deed registration charges or fees in India:

Property Value: Higher-value properties generally incur higher registration charges due to higher stamp duty rates.
Location: Urban properties often have higher registration charges compared to rural areas due to varying stamp duty rates.
Stamp Duty Rates: The applicable stamp duty rates, which differ across states and regions, also influence registration charges.
Miscellaneous Charges: Registrar of Deeds may levy additional charges, varying from state to state and Registrar to Registrar. It’s crucial to inquire about all applicable charges before proceeding with registration.

Understanding these factors helps individuals plan effectively and ensure a smooth gift deed registration process.

Grounds for the Cancellation of a Gift Deed in India

Grounds for the cancellation of a gift deed in India are delineated in Section 126 of the Transfer of Property Registration Act, 1882. These include:

Non-Fulfillment of Stipulated Events: If events specified in the gift deed either occur or fail to occur without the donor’s involvement or control, the deed can be cancelled. The deed must mention this ground for cancellation. For the cancellation to be legally binding, the terms must not be objectionable or unlawful unless expressly stated in a separate agreement.
Assent Obtained Through Improper Means: If the donor’s assent to the agreement was obtained through deception, coercion, undue influence, or misinterpretation of the gift deed, the property transfer can be revoked.

Recent Updates on the Gift Deed

Revised Stamp Duty in Tamil Nadu After a 20-Year Gap

April 2023: Tamil Nadu has recently revised stamp duty rates for various legal transactions after a 20-year gap. The revised charges apply to adoption deeds, affidavits, agreement duplications, agreement cancellations, and memoranda of association for companies. However, stamp duty for property registration remains unchanged in Tamil Nadu.
The Indian Stamp (Tamil Nadu Amendment) Act 2023 introduced increased stamp duty rates. Adoption deeds now incur a stamp duty of ₹1000, up from ₹100. Affirmations or declarations are charged ₹200, increased from ₹20, and duplicating an agreement costs ₹500, up from ₹20.
The increase aims to reduce expenses related to printing stamp papers of lower denominations.

No Stamp Duty Exemption for Multi-State Cooperative Societies in Tamil Nadu

March 2023: The Madras High Court issued a circular clarifying that stamp duty exemption provided by the Tamil Nadu government does not extend to cooperative societies under the Multi-State Cooperative Societies Act 2002. Justice SM Subramaniam highlighted that the exemption is specific to societies governed by the Tamil Nadu Cooperative Societies Act, a state enactment.
The High Court pointed out that under the Multi-State Cooperative Societies Act 2002, cooperative societies registered therein are considered multi-state cooperative societies, distinct from those under the Tamil Nadu Cooperative Societies Act, 1983. Thus, the stamp duty exemption does not apply to societies registered under the Multi-State Cooperative Societies Act 2002.