All you need to know about Gift Deed

 A Gift Deed is a document that allows the original property owner to voluntarily give away their property to a person, trust or a party as a gift. Having this document in place helps avoid disputes that may arise because of inheritance claims. Key of Dream elaborates the legal process involved and the important inclusions to the deed.

A Gift Deed is a legal document elucidating the voluntary transfer of the property – movable or immovable – to someone else without any monetary exchange. The property owner can hand it over either to a person or an institution; however, it should be accepted by the donee (recipient) during the lifetime of the donor and should be registered under Section 122 of the Property Transfer Act, 1882 with the sub-registrar as per Section 17 of the Registration Act, 1908. Like a Sales Deed, Gift Deed also comprises the details of the transferor and the recipient.

Having a registered gift deed in place helps avoid any sort of litigation that may arise in future.

Eligibility for gift deed

To document a gift deed, the donor should be competent. According to the law, a donor should not be a minor. On the contrary, the recipient can be a minor with a natural guardian as a nominee, who shares the onus of managing the property till the donee becomes an adult. Additionally, the beneficiary should be alive; else, the property will become invalid.

Inclusions in a deed

A gift deed must include the following details:

Date and place of where the deed is documented

Donor’s details (Name, Date of Birth, Father’s Name, and Address)

Details of the donee (Name, Father’s name, Date of Birth and Relationship with the Donor)

Relationship between the donor and the donee

Elucidation of the property gifted

Signatures of both- the donor and the donee

Details of two witnesses present at the time of property transfer

Signature of the witnesses

Process of transferring a property via a Gift Deed

Gift deed draft

Aditya Khadri, a Legal Expert, shares that a gift deed is a legal document that includes details pertinent to the property transfer and is prepared with the help of an attorney. It should contain important details of the transferee. The transfer should be voluntary and should not be a forceful act.

Acceptance of the deed

The acceptance process of the gift transfer is completed only when the donee receives the property while the donor is alive. The acceptance can be validated by taking possession of the property.

Registration

The ownership transfer under a gift deed can only take place for a registered property. A minimum of two witnesses are required to attest to the deed. Usually, the number of witnesses required varies from state to state.

Documents required to register a Gift Deed

One needs to produce the original gift deed, as well as an ID proof, PAN card, Aadhaar card, the sale deed of the property, as well as other documents pertaining to other agreements.

Stamp duty on gift deed

Registration of a gift deed involves stamp duty and registration fee. The amount of stamp duty varies across different states. Generally, the stamp duty rates for property transferred by gift is the same as the sale of conveyance deed.

For instance, in Delhi, the stamp duty for property transferred by sale or gift deed is the same- four percent for men and six percent for women.

Similarly, in West Bengal, stamp duty for men is five percent of the market value of the property in panchayat areas and six percent in municipal areas.

However, in Karnataka, while family members are required to pay anywhere between Rs 1,000 and Rs 5,000, and non-family members are charged 5.6 percent of the total property value.

Recently, the Uttar Pradesh government also waived off the stamp duty on properties transferred to family members. Earlier the applicable stamp duty on such transactions in the State was seven percent of the property value.

Many States also offer discounts on the registration fee if the property is gifted.

Is there a need to pay stamp duty for a property gifted to an NGO or a trust?

In usual cases, gifting a property to a trust/NGO/charity centre does not incur any stamp duty. However, you must check with your registrar department, regarding the rules. Also, in many cases, certain State regulations bar NGOs from accepting property as a gift.

How to cancel a gift deed?

According to Section 126 of the Transfer of the Property Act, a gift deed can be revoked if it complies with following conditions:

There is a mutual consensus between the donor and the donee that the deed should be revoked.

The property transfer event was just based on the will of the transferor and the recipient was unwilling to accept the asset.

The condition is illicit, repugnant and immoral to the estate created under the Gift.

This means a gift, which is based on fraud, or any illegal grounds can be revoked. However, it is recommended to consult a legal expert to help through the process.

Remember, once the gift deed is prepared, revocation is not possible unless a clause of revocation is added to the deed. Therefore, it is imperative to add ‘revocation clause’ to avoid future complications.

Frequently Asked Question:

Can a property be gifted to a minor?

In case the property is gifted to a minor, the legal guardian must accept it on the minoru2019s behalf.

Can a property received as a gift be sold?

If there were no conditions attached to your registered gift deed, you can sell the property.

Will the donee be liable to pay dues on the gifted property?

Yes, the donee becomes the legal owner and will then need to pay all the pending/unpaid dues and charges, such as electricity and maintenance charges and municipal taxes.

Is income tax calculated on a gift deed?

A Gift deed has to be declared while filing the Income Tax Returns (ITR). The Gift Tax Act of 1958 was abolished in year 1998, only to be reintroduced in 2004.