Planning to gift property? Keep these things in mind
A deed gift is an agreement that is used by a person who wishes to donate property or money to someone else. By using gift deeds, real estate that is movable or immovable may be given freely by a person to the recipient. The gift deed permits the property owner to gift the property to a third party and avoid any disputes arising from the succession of property or claims to inheritance.
It is vital to understand that a gift deed registered is also an evidence on its own, and unlike wills, it is a transfer that occurs immediately, and you will not need to appear before the court to execute the deed. Thus it is also a way to help to save time.
This article is merely an outline of the gift laws that are used in India. Let’s begin with the article and discover some important things you need to be aware of regarding gift deeds.
Different types of gifts
- Intervivos – These are gifts that were made in the course of the donor’s life and comprise the interests of either the present or the future.
- Causa Mortis: These are gifts for the deathbed and are a gift planned in anticipation of the death of the donor. This kind of gift isn’t legally valid unless the donor passes away from an imminent illness and has predicted that he will die before he is given the donation.
- Outright – These types of gifts are without restrictions.
- Onerous – Associated by the obligation or burden placed on the doer.
- Remunerative – Made to compensate for services delivered.
Drafting Gift Deed
Drafting a deed of gift has to contain the following information:
- Date and location where the gift deed is signed
- Information on the gift deed pertains to donors, such as their address, name, DOB, relationship and signatures.
- The property’s complete information that the gift deed is written
- Two witnesses who bear witness on the grant deed, as well as their signatures
In addition, based on the amount that is pre-determined by the government of the State, the gift deeds in India are required to be stamped on paper after you have paid the fees. Additionally, you should be aware that your gift certificate has to be registered with an office of the registrar or sub-registrar.
Critical Clauses to Mention
The most important clauses that should be part of the gift deed’s format include:
- There isn’t any cash or force involved: This is a condition of consideration of the gift deed, which is important to include. It should be clearly stated that there is no exchange of money and that the gift deed was made entirely out of love and affection and is not based on force or money.
- You are the property owner when you make a gift: Only the owner of the property can gift you an asset. If you’re not the titleholder or property owner, you cannot offer a home as a gift deed, even to someone else, even in anticipation.
- Define the property: The property details such as the kind of property, the structure location, area location, etc. It must be explicit in the gift deed.
- Include the liabilities: If any kind of liability or rights are attached to the house, like whether the donee can buy or lease the house, these clauses should be included in the form of a gift deed.
- Relations between donors and the donee: In the event that both the donor as well as the donee are blood relatives, certain state governments may offer a reduction regarding stamp duty.
Income Tax on Gift Deed
The gift deeds issued in India must be reported within the tax return for income (ITR) if you’ve been given an immovable property in a gift deed. In that case, you’ll be required to pay tax in the event that your tax on stamps value is greater than the amount of Rs. 50000.
Tax Exemption for Gift Deed in India
If the property were acquired from one of the following, the clause above wouldn’t be applicable, and the donee won’t be taxed.
- If the gift deed was given on the occasion of the marriage ceremony of the individual.
- If the gift certificate is obtained from relatives or someone else or from an individual member of the HUF.
- If the deed is accepted in the context of the imminent death of the person who gave it or the payer.
- If the gift deed was obtained through inheritance or the will.
- If the deed was taken from an authorized local to the area.
- If the gift certificate is taken from a trust or institution registered in accordance with Section 12AA.
- If the deed has been obtained from a foundation or fund, university hospital or educational establishment mentioned by section 10(23C).
Revocation of Gift Deed
When the property is legally gifted, it becomes the property of the donee, which cannot be changed easily. However, according to Section 126 of the Transfer of Property Act 1882, the revocation of the deed to gift could be permissible in certain instances as follows:
- If it is discovered that the reasons for the gift deeds in India were untrue, illegal or unjust.
- In the event that the deed of gift was signed through fraudulent means or by coercion.
- If it is stipulated from the beginning to the point that the deed be irrevocable in certain circumstances.
In all cases, even in the event of the death of the donor, the legal heirs of the donor can advance the process by way of the gift deed’s revocation.
Pros and cons to gift acts
- A gift deed can be executed during the life of the donor. Then it is transferred immediately, unlike in wills, which are valid following the death of the donor.
- The gift deed must be registered to make it less susceptible to legal action.
- Gift deed transfers are tax-free for the donor as well as the recipient.
- The gift deed cannot be revoked after execution.
- Gift deeds will incur an additional charge to cover stamp duty during the transaction. This is different between states.
Can you sell a property that was gifted as a gift deed?
If there are no terms or conditions included in the gift deed and if you’ve recorded the gift deed, you can transfer the property to another person without a doubt.
Can a property be given to a minor person under 18 years of age?
If the property has been transferred to a minor under by gift deed, their legal guardians must accept the gift for the benefit of their child. After reaching an age of legality, the minor may decide to accept or reject the gift if they choose to accept or return it.
Will I be required to pay something for the property I received as a gift?
A gift is not an offer in all respects. The only expenses to be borne by the donor are the stamp duty and gift deed registration charges and any other costs that arise due to legalities and formalities that are a part of the deed of gift. If the value of the property is greater than 50000 rupees, you will have to pay taxes, and you may need to include it on the Income Tax Form based on the source you purchased it from.