A Gift Deed is a legally binding document that facilitates the transfer of ownership of a property from one individual (donor) to another (donee) without any monetary exchange. This method of property transfer is commonly used among family members and charitable organizations. However, to ensure its legality, it must adhere to specific legal requirements, including proper documentation and registration.
Legal Framework Governing Gift Deeds
The Transfer of Property Act, 1882, governs Gift Deeds in India. According to Section 122, a valid Gift Deed must involve a voluntary transfer without coercion, fraud, or undue influence. The donor should be legally competent, meaning they must be of sound mind and above 18 years of age. The donee, on the other hand, can be an individual, a legal entity, or a charitable institution.
A Gift Deed can be executed for both movable and immovable properties. While movable assets like cash, jewelry, and stocks do not require mandatory registration, immovable properties such as land, houses, or commercial spaces must be registered with the Sub-Registrar’s Office. The donee must accept the gift while the donor is still alive for the transfer to be legally valid.
How to Draft and Execute a Gift Deed?
A Gift Deed must include the following essential clauses:
- Details of Donor & Donee – Full name, address, and relationship (if any).
- Description of the Gifted Property – Exact details of the property being gifted.
- Voluntary Nature of the Gift – Confirmation that the donor is gifting willingly.
- Acceptance Clause – A statement that the donee has accepted the gift.
- Witness Signatures – Two witnesses must sign the deed.
Registration of Gift Deed
As per the Registration Act, 1908, a Gift Deed for immovable property must be registered at the Sub-Registrar’s Office. Steps for Registration:
- Prepare the Gift Deed with the help of a lawyer.
- Pay Stamp Duty (varies by state, usually 2% to 5% of the property value).
- Visit the Sub-Registrar’s Office with required documents:
- Original Gift Deed
- Identity proof of both parties
- Property documents
- Witnesses (at least two)
- Sign the Deed in Presence of the Registrar.
Once registered, the donee becomes the legal owner of the property.
Tax Implications of a Gift Deed
Taxation on gifted property depends on the relationship between the donor and donee. Under Section 56(2) of the Income Tax Act, 1961, gifts received from specified relatives, such as parents, spouse, children, and siblings, are exempt from tax. However, if a gift is received from a non-relative and exceeds ₹50,000 in value, it is treated as income and is taxable under "Income from Other Sources."
Another critical aspect is Capital Gains Tax. Although the donor does not pay capital gains tax at the time of gifting, the Donee becomes liable for capital gains tax when they decide to sell the gifted property. The tax is calculated based on the original acquisition cost paid by the donor.
Conclusion
A Gift Deed is a secure and legally recognized method for transferring property without monetary exchange. However, proper documentation, registration, and tax considerations are crucial to ensure a hassle-free transfer. Seeking legal assistance can help in drafting a Gift Deed correctly and avoiding future disputes.
If you are considering gifting property to a loved one, ensure you follow the legal process diligently to avoid any legal or financial complications. Consulting a real estate expert or legal advisor can help navigate the complexities associated with Gift Deeds and ensure a seamless property transfer process.
