A Deed Gift, commonly referred to as a Gift Deed, is a legal instrument used to voluntarily transfer ownership of property or assets from one person (donor) to another (donee) without any monetary consideration.

In India, Gift Deeds play a crucial role in estate planning, enabling property owners to distribute their wealth among family members, friends, or institutions during their lifetime.

This article provides a detailed exploration of Gift Deeds in the Indian context, including their legal framework, the process of Gift Deed registration, and their tax implications under the Income Tax Act.

What Is A Gift Deed?

A Gift Deed is a legally binding document used to transfer ownership of movable or immovable property as a gift.

Unlike a sale deed, a Gift Deed does not involve any monetary exchange between the donor and the donee.

Key Features:

1. Voluntary Transfer: The transfer is made out of the donor’s free will, without coercion or undue influence.
2. Legal Validity: It must comply with the provisions of the Transfer of Property Act, 1882.
3. Immediate Ownership Transfer: Ownership rights are transferred immediately upon execution and registration of the Gift Deed.

Types of Properties That Can Be Gifted

1. Movable Properties:
   • Examples: Cash, jewellery, vehicles, stocks, and bonds.
2. Immovable Properties:
   • Examples: Land, houses, apartments, and other real estate.
3. Other Assets:
   • Examples: Intellectual property, patents, or digital assets.

Legal Framework Governing Gift Deeds In India

Gift Deeds in India are governed by:

1. Transfer of Property Act, 1882:
   • Defines the legal requirements for transferring property through a Gift Deed.
2. Income Tax Act, 1961:
   • Regulates the tax implications of gifts.
3. Registration Act, 1908:
   • Mandates the registration of Gift Deeds for immovable property.

Why Create A Gift Deed?

A Gift Deed offers several advantages over other forms of property transfer:

1. Legal Clarity:
   • Clearly defines the rights of the donor and donee, reducing the chances of future disputes.
2. Tax Benefits:
   • Certain gifts are exempt from taxation under the Income Tax Act.
3. Immediate Ownership:
   • Ensures quick and seamless transfer of ownership.
4. Estate Planning:
   • A key tool for distributing one’s property among heirs or family members.

Essential Components Of A Gift Deed

A valid Gift Deed must include the following details:

1. Parties Involved:
   • Full names, addresses, and ID proof (such as PAN card, Aadhaar card) of the donor and donee.
2. Property Description:
   • A detailed description of the property being gifted, including its location and dimensions.
3. Legal Declaration:
   • A statement affirming that the gift is being made voluntarily and without monetary consideration.
4. Acceptance Clause:
   • A clause confirming that the donee has accepted the gift.
5. Signatures and Witnesses:
   • Signatures of the donor, donee, and at least two Witnesses.

Process Of Gift Deed Registration In India

1. Drafting the Gift Deed

• Prepare the Gift Deed with all required details, either through a lawyer or by using a standard Gift Deed format.

2. Payment of Stamp Duty

• Calculate and pay the appropriate stamp duty based on the property’s value.
• Stamp duty rates vary by state and are lower for family members.

3. Execution of the Deed

• The donor, donee, and witnesses sign the Gift Deed in the presence of a sub-registrar.

4. Submission of Required Documents

• Documents required include:
  • Original Gift Deed.
  • ID proof and address proof of the donor and donee.
  • Property-related documents, such as previous sale deeds or property tax receipts.
  • PAN card.

5. Registration with Sub-Registrar

• Submit the Gift Deed and supporting documents at the sub registrar's office for registration.

6. Obtaining the Registered Gift Deed

• After verification, the sub-registrar registers the Gift Deed, and the donee receives a registered Gift Deed.

Tax Implications Of Gift Deeds

1. Taxation Under the Income Tax Act

• Gifts Received by Family Members:
  • Gifts received from specified relatives (eg, parents, siblings) are exempt from tax.
• Gifts Exceeding ₹50,000:
  • If the value of the gift exceeds ₹50,000 and the donee is not a relative, it is taxable as income from other sources.
• Gifted Property:
  • The donee may be liable for capital gains tax upon selling the gifted property.

2. Stamp Duty and Registration Charges

• The donor must pay stamp duty and registration charges during the Gift Deed registration process.

Revocation Of Gift Deeds

A Gift Deed can be revoked under certain conditions:

1. Mutual Consent:
   • Both the donor and donee agree to revoke the deed.
2. Revocation Clause:
   • If the deed contains a revocation clause, it can be revoked upon meeting the specified conditions.
3. Fraud or Coercion:
   • A court may annul the deed if it was executed under duress or fraud.

Gift Deed vs Sale Deed

Feature

Gift Deed

Sale Deed

Consideration

No monetary consideration involved

Requires monetary exchange

Tax Implications

May involve estate taxes

Attracts capital gains tax

Registration

Mandatory for immovable property

Mandatory

Purpose

Used for voluntary transfers

Used for property sales

Stamp Duty

Lower for gifts to family members

Higher and varies based on sale value

Documents Required For Gift Deed Registration

1. Identity Proof:
   • PAN card, Aadhaar card, or passport of both the donor and donee.
2. Address Proof:
   • Utility bills, voter ID, or driving license.
3. Property Documents:
   • Title deed, property tax receipt, and encumbrance certificate.
4. Gift Deed:
   • The original Gift Deed drafted and signed by the parties involved.
5. Witness Details:
   • IDs of at least two Witnesses.

Common Mistakes To Avoid

1. Incomplete Information:
   • Ensure the Gift Deed includes all necessary details about the property and parties involved.
2. Failure to Register:
   • Unregistered Gift Deeds for immovable properties are legally invalid.
3. Not Including a Revocation Clause:
   • Without this, the donor may lose control over the gifted property.
4. Ignoring Tax Implications:
   • Understand the tax liabilities for both the donor and donee.

FAQs About Gift Deeds

1. Can I gift my property to a friend?

Yes, you can gift property to a friend through a valid Gift Deed. However, the gift may attract tax under the Income Tax Act if its value exceeds ₹50,000.

2. Is registration mandatory for Gift Deeds in India?

Yes, for immovable properties, Gift Deed registration is mandatory under Indian law.

3. Can a Gift Deed be challenged?

Yes, a Gift Deed can be challenged in court if it was executed under coercion, fraud, or undue influence.

4. What is the stamp duty for Gift Deeds?

Stamp duty varies by state and is lower for gifts made to family members.

The Bottom Line: How Yellow Can Help

A Deed Gift or Gift Deed is an essential tool for transferring property and assets in India, offering a clear and legally valid framework for property transfers.

By ensuring compliance with legal requirements and understanding the tax implications, donors can create a seamless process for gifting their wealth to loved ones or institutions.

With proper documentation, registration, and legal guidance, a registered Gift Deed can protect both the donor and donee, ensuring that the transaction remains free from disputes and complications.

At Yellow, our expert team can assist you in drafting a meticulous Gift Deed, ensuring that all legal requirements are met. We provide guidance on the Gift Deed format, appropriate stamp duty, facilitate immovable property Gift Deed registration, and ensure that the document accurately reflects your intentions as a donor. To explore our comprehensive services further, please visit our dedicated Gift Deed page.