A Deed of Gift, also known as a Gift Deed, is a legal document used in India to transfer ownership of certain assets or properties from one person, known as the donor, to another person, known as the donee, within one's lifetime and without any exchange of money.

It is a common way to gift property and other assets to family members, friends, or other individuals, and carries legal significance under the Transfer of Property Act, 1882, and the Income Tax Act, 1961.

Key Takeaways

• Explore the meaning and purpose behind a Gift Deed as well as its practical applications.
• Discover the importance of formalising gifts through a Gift Deed, ensuring clarity and legality.
• Learn about the prerequisites that make a Gift Deed legally valid and enforceable.
• Gain insights into the potential income tax implications associated with a Gift Deed.
• Understand the circumstances and procedures involved in revoking a Gift Deed.
• Differentiate between a Gift Deed and a Will, and understanding their distinctive roles in estate planning.

Purpose Of A Deed Of Gift

A Gift Deed serves the following important purposes:

Transfer of Ownership

One of the primary purposes of a Gift Deed is to transfer ownership of property or assets. This can include immovable property like real estate, movable property, stocks, bonds, or any other valuable items.

Estate Planning

Individuals often use a Gift Deed as part of their estate planning strategy. By transferring assets during their lifetime, donors can plan implication of estate taxes and ensure that their assets are distributed equitably and in accordance with their wishes.

Charitable Donations

Non-profit organisations and charitable causes often receive donations through a Gift Deed. Donors can use this legal instrument to support causes close to their hearts.

The Importance Of Registering a Gift Deed

A registered Gift Deed is a legally binding document that formalises the transfer of ownership of assets (including property transfer) from one party to another without any monetary exchange.

The act of registering the Gift Deed with the appropriate government authority provides an extra layer of authenticity and legal validity. This registration process not only ensures the document's credibility but also helps avoid future disputes and challenges to the validity of the gift.

In order to undergo Gift Deed registration, you will need to have the original Gift Deed with you, along with other documents, including an ID proof, PAN card, Aadhaar card, and property details, such as the sale deed. You could also be required to furnish documents that pertain to other agreements regarding this property.

The transfer of immovable property as a gift must be made through a registered Gift Deed, which should be undertaken at a local sub-registrar after paying the applicable stamp duty and registration charges.

Key Components Of A Gift Deed

Donor and Donee Details

The Deed of Gift includes the names, addresses, and other identifying information for all parties involved.

Description of the Gift

The Gift Deed clearly specifies details of the gifted property or other assets. This could include real estate, movable assets like vehicles, jewellery, or even financial instruments.

Transfer of Ownership

The document explicitly states that the ownership of the mentioned asset is being transferred from the donor to the donee.

Consideration

Unlike a sale deed, a Gift Deed does not involve any monetary consideration. It should mention that the transfer of assets is by way of a gift and not a sale. In these cases, natural love and affection between the parties is stated as a reason for the gift in the Gift Deed.

Conditions and Restrictions

If there are any conditions or restrictions attached to the gift, they must be outlined clearly in the Gift Deed. For instance, the donor may specify that the property cannot be sold for a certain period.

Acceptance by Donee

The gift is complete only when it is accepted by the donee. The acceptance should also be mentioned in the deed.

Requirements for a Gift Deed

A Gift Deed in India comes under the Transfer of Property Act, 1882.

Under this Act, the transfer of immovable property as a gift must be made through a registered Gift Deed, which should be undertaken at a local sub-registrar after paying the applicable stamp duty and registration charges.

Stamp duty differs from state to state, but is typically in the region of 2-10% of the market value of the property.

There are some states where the rate is lower or higher, and some with specific exemptions for gifting between relatives, but in most cases stamp duty on Gift Deed is payable.

Registration fees will also be payable for Gift Deed registration.

Income Tax Act Implications On A Gift Deed

It is important to note that if the donor and recipient are not related to one another, as per the provisions of the Income Tax Act, then the gift is taxable in the hands of the recipient (assuming it exceeds Rs 50,000).

'Relative' has a specific definition for the purposes of gifts. Eg, first cousins are not considered to be relatives for tax purposes.

If a gift is taxable, the rate of tax will depend on the income tax slab applicable to the recipient. The amount that is taxable under the Income Tax Act will depend on the nature of the gift (whether it is money, immovable property, or something else, like shares), calculated on the basis of the market value.

Gift Deed And The Relevance Of The Transfer of Property Act

Property laws, as governed by the Transfer of Property Act, 1882 in various jurisdictions, are closely associated with a Gift Deed. These acts specify the legal requirements for transferring ownership of real estate, personal property, or other assets.

When drafting a Gift Deed, it's essential to consider the provisions of the Transfer of Property Act that apply to the type of property being transferred. Understanding these regulations is critical for ensuring the deed's legal validity.

Revoking A Gift Deed

Sometimes, there may be situations wherein the donor wishes to revoke a Gift Deed. Revoking a Gift Deed is a significant step, and it's essential to understand the process and implications involved. Here's what you need to know:

Legal Validity

A Gift Deed is a legally binding document, and revoking it is not a straightforward process. To revoke a Gift Deed, the donor must demonstrate valid legal grounds, carefully assess the contents of the Gift Deed and follow the legal procedures prescribed in their jurisdiction. Your Gift Deed should also have a revocation clause, else it is difficult to revoke a Gift Deed.

Common reasons for revoking a Gift Deed may include non-fulfillment of conditions or obligations mentioned in the Gift Deed.

Legal Grounds for Revocation

The ability to revoke a Gift Deed typically depends on the legal provisions in the jurisdiction and the specific circumstances surrounding the gift as well as if there is a revocation clause. Some common legal grounds for revocation may include:

• Fraud or undue influence in obtaining the gift.
• Non-compliance with the conditions mentioned in the Gift Deed.
• Lack of capacity on the part of the donor at the time of making the gift.
• Violation of any statutory provisions related to the Gift Deed.

Legal Process

The process of revoking a Gift Deed often involves legal proceedings. This process usually includes:

• Filing a revocation suit in the appropriate court where the party is contesting the revocation.
• Providing evidence to support the legal grounds for revocation.
• Notifying the recipient or other parties involved in the original Gift Deed.
• Attending court hearings and complying with the court's orders.

Legal Advice

Given the complexity of revoking a Gift Deed and the potential legal implications, it's crucial to seek counsel from a legal expert.

An experienced attorney can provide guidance on the specific steps and requirements in your jurisdiction, as well as help you navigate the legal process effectively.

Timing and Statute of Limitations

There may be time limitations on revoking a Gift Deed, so it's important to act promptly if you believe you have grounds for revocation. Statutes of limitations vary by jurisdiction, so consulting with a legal expert is advisable.

Revoking a Gift Deed is a legally complex process that should not be undertaken lightly. It requires a clear legal basis, adherence to statutory provisions, and often involves legal proceedings.

If you are considering revoking a Gift Deed, consult with a qualified attorney who can provide guidance tailored to your specific circumstances and jurisdiction, ensuring that the process is conducted in compliance with the law.

Gift Deed vs Will

While Gift Deeds and Wills are both legal instruments used for transfer of property and other assets, they serve different purposes and have distinct characteristics.

Understanding the differences between a Gift Deed and a Will is essential for effective estate planning and asset distribution. Let's explore the key distinctions between these two legal documents.

Gift Deed

A Gift Deed is a legal document that facilitates the transfer of ownership of property or assets from a donor (the giver) to a recipient (the receiver) without any exchange of money.

Here are some important features of a Gift Deed.

Immediate Transfer

A Gift Deed results in an immediate transfer of ownership. Once executed and registered, the recipient becomes the legal owner of the gifted property or asset. This transfer of property takes place during the lifetime of the parties.

Irrevocable

In most cases, a Gift Deed is irrevocable. Once the gift is given, the donor typically cannot take it back, unless there are specific legal grounds for revocation.

No Probate

A Gift Deed avoids the Probate process, which means the transfer occurs outside the scope of the deceased's estate and is not subject to probate court.

Tax Implications

Depending on the value of the gift and local tax laws, there may be tax implications for both the donor and the recipient, as the case may be.

Will

A Will, also known as a Last Will and Testament, is a legal document that outlines the distribution of a person's assets after their death. The document only becomes legally valid once signed in the presence of two Witnesses. Here are key features of Wills.

Posthumous Distribution

Wills come into effect only after the death of the Testator (the person creating the Will). They dictate how the Testator's assets will be distributed among Beneficiaries.

Revocable

Wills are revocable during the Testator's lifetime, meaning they can be updated or changed as circumstances or preferences evolve.

Probate Process

Wills typically go through the Probate process, during which the court validates the Will and oversees the distribution of assets according to the testator's wishes. Probate is applicable where Wills are made in the cities of Mumbai, Madras and Kolkata or where immovable property is situated in any of these cities.

No Immediate Ownership Transfer

Unlike a Gift Deed, a Will does not transfer ownership immediately upon execution. The assets are distributed according to the Will's instructions after the Testator's death.

Guardianship Provisions

Wills can also specify Guardianship for minor children and outline other matters, such as funeral arrangements and the appointment of an Executor.

Read more: Executor, Guardian, Witnesses: The Supporting Acts Behind Your Will-Making Story

Choosing Between A Gift Deed And Will

Gift Deeds and Wills serve distinct legal purposes. it's essential to recognise that a Will is a fundamental document in estate planning. The decision isn't necessarily a choice between the two but rather whether a Gift Deed is required in addition to a Will to achieve specific objectives that are based on your unique situation. Here are some things you may wish to consider:

• Immediate Transfer: If you want to transfer property immediately while alive, a Gift Deed is the appropriate choice.
• Posthumous Distribution: If you want to specify how your assets should be distributed after your death and maintain flexibility in changing your decisions, a Will is the preferred option.
• Tax Considerations: Consult with a financial advisor or attorney to understand the tax consequences of both options and choose the one that aligns with your financial goals.
• Complex Estate Planning: In cases of complex estates with multiple Beneficiaries and various assets, a combination of a Gift Deed and a Will may be necessary to achieve your estate planning objectives.

The Bottom Line

In conclusion, a Gift Deed plays a crucial role in facilitating asset and property transfer. Their legality and formalised nature make them essential tools for both personal and philanthropic transactions.

Whether you're making a charitable donation, planning your estate, or giving a gift to a loved one, understanding the purpose and key elements of a Gift Deed is essential. Always consult with a legal expert to ensure that your Gift Deed is in compliance with the laws of your jurisdiction and serves your intended purpose effectively.

When used correctly, a Deed of Gift can provide peace of mind to both donors and recipients, ensuring that the transfer process is well-documented and legally sound.

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.