Property Gift Deed in India -Stamp Duty | Format | Rules | Relation

Everything you need to know about Gift Deeds

There is nothing better than getting a gift, and there is also joy in giving. No matter how big or small the gift is, the sentiment is the same. When you are gifting something as large as property or a house, however, there are certain steps that should be followed, this is done so that the new owner has clear titles and documentation of the property and how they came to own it.

Following Pointers are covered under Gift Deed:

  • What is a gift deed?
  • Gift Deed Format
  • Accepting a Gift Deed
  • Registering a Gift Deed
  • Common questions about the Gift Deed

What is a gift deed?

A gift deed is a means by which you legally give someone a gift of movable or immovable property. This exchange is made between a person known as the donor, and it must be voluntary. The receiver of the gift or donee has to accept the gift. The gift deed is valid only if nothing is expected as compensation of the gift, i.e the gift is given freely, without force and without any expectations.

A gift has to meet certain criteria –

  • It has to be tangible
  • It has to be well defined existing movable or immovable property
  • It has to exist in the present and can’t be a future property
  • It has to be transferable

Drafting a Gift Deed – Gift Deed Format

Like any legal document, the Gift Deed also needs to follow a certain format and meet certain requirements to be considered valid. This is why the best policy to follow is to have a lawyer assist you in drafting a gift deed. The deed must state-

  • What is being gifted and from whom to whom as well as their relationship whether gift deed in blood relation or not.
  • It should look like a contract between donor and donee where there is free and open giving and receiving of the gift.
  • It should state that the donor is giving the gift out of free will and not being forced, it should also state that there is no exchange of money in return for the gift.
  • The Gift Deed should also mention that the donor is not bankrupt and should be above 18 years of age.
  • It should mention the date and location where the registration will take place.

Accepting a Gift Deed:

This is as important as giving the gift, the donee or receiver of the gift must accept it by signing the Gift Deed. There can’t be much delay as the gift and the Gift Deed is considered invalid if the donor dies before the donee accepts the gift.

Registering a Gift Deed or Requirements for Gift Deed:

In accordance with Section 123 in The Representation of the People Act, 1951, the gift cannot be passed on to the receiver unless and until it is registered. What you should keep in mind while registration –

  • The cost of registration is calculated based on the value of the gift
  • The Deed must be signed by the donor
  • The Deed should have two witnesses and it has to be attested by both of them
  • The donor and donee must be present in the office of the Registrar
  • Valid Identification documents (passport, driving license etc.) and PAN card must be submitted to the Registrar
  • Stamp duty and Transfer Duty must be paid

Common questions about the Gift Deed:

1-    Who is eligible for a gift deed?

You can gift anyone. While minors can’t be a donor, they can be a done, they are able to receive the gift if they have a guardian who will accept the gift on their behalf. Once the minor becomes an adult, they can either accept the gift or return it.

2-    Who can create a Gift Deed?

Anyone can create a Gift Deed, as long as they are not minors or are being forced to create one. You must also have valid identification proofs like Adhar, passport etc.

3-    What documents are needed to create a gift deed?

For a Gift Deed to be valid it needs to be registered, for registration, you will need to hand over documents like passport, PAN, driving license etc. to the Registrar.

4-    Is stamp duty payable on gifted property?

Yes, you must pay stamp duty and transfer duty. The cost of Stamp duty will vary in each state.

5-    Is there Tax levied on Gift Deed?

There is no tax on Gift Deeds in the hands of the donee as per the Income Tax Act if they are close relatives (mother and daughter etc.). If the donee is not a close relative, then there will be tax levied if the total of all the gifts is valued at more than Rs.50,000.  If it is more than this amount, it will be taxable without any threshold exemption.

If you are a close relative receiving the gift, then the first time you will pay tax is when you sell the property. This will be counted as short term (less than 36 months) or long term gains. If it is short term you will pay tax as per the bracket it falls under; if it is long term you will have to pay 20% tax. If you don’t wish to do so, you can invest this money by buying residential property or capital gains bonds of Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI).

6-    Can a Gift Deed be cancelled or changed?

Once the Gift Deed is registered and executed, it cannot be revoked or altered. This is unless the donor has made a provision to do so. It can also be revoked if the donor and donee agree on certain terms that allow the Deed to be revoked. At times, the donor might also mention that the property or house will be given back to his(donor’s) family upon the death of the donee.