In India, transferring property through a Gift Deed is a common practice governed by the Transfer of Property Act, 1882.

A Gift Deed is a legal document that outlines the voluntary transfer of property from a donor to a donee without any exchange of money.

The process is legally binding and requires adherence to specific protocols to ensure both parties' rights are protected and the transfer is recognised by law.

This article provides a comprehensive overview of the legal requirements and processes involved in executing a Gift Deed in India.

What Is A Gift Deed?

A Gift Deed is a document that legally transfers ownership of property from one person to another without any monetary compensation.

It is used for both movable and immovable properties and must be executed during the lifetime of the donor.

The deed becomes effective immediately, and the transfer is irreversible, provided all legal conditions are met.

Read more: All You Need To Know About A Gift Deed

Legal Framework Governing Gift Deeds

Gift Deeds in India are primarily governed by the Transfer of Property Act, 1882, and the Registration Act, 1908.

These laws outline the necessary conditions and legal procedures for the valid transfer of property through a gift.

Additionally, the Income Tax Act also has implications for both the donor and the donee, particularly concerning tax liabilities.

Essential Elements Of A Gift Deed

Voluntary Transfer

The transfer of property must be made voluntarily and without coercion. The donor should be in a sound state of mind and acting out of their own free will.

Acceptance by the Donee

The gift must be accepted by the donee during the lifetime of the donor. If the donee dies before acceptance, the gift is void.

Registration of the Gift Deed

Under Section 123 of the Transfer of Property Act, a gift of immovable property must be registered. This requires the Gift Deed to be signed by or on behalf of both parties and attested by at least two Witnesses.

Stamp Duty and Registration Charges

The Gift Deed should be executed on non-judicial stamp paper, the value of which depends on the property’s market value as assessed by the state government. The deed must then be registered at the local sub-registrar's office, incurring additional registration charges.

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 on the gifted property.

Detailed Process Of Registering A Gift Deed

Drafting the Gift Deed

A legal expert or lawyer should draft the Gift Deed to include a detailed description of the property, the names and details of the donor and donee, and any conditions attached to the gift.

The deed should also clearly state that the transfer is being made out of affection and without consideration.

Stamp Duty and Registration

Once drafted, the Gift Deed needs to be printed on appropriate stamp paper.

The value of the stamp paper varies based on the property value and the applicable stamp duty in the state where the property is located.

After obtaining the stamp paper, the deed must be registered at the local sub-registrar’s office to make it legally binding.

Both the donor and donee must be present at the time of registration, along with two Witnesses. Lastly, they must pay stamp duty and register the Gift Deed.

Legal Requirements and Documents

For registration, several documents are required, including:

• Original Gift Deed.
• Identification proofs of both the donor and donee.
• Proof of payment of applicable stamp duty.
• Two passport size photographs each of the donor and the donee.
• Any other documents specified by the local authority or registration act.

Read more: Gift Deed Registration: When To Do It & Why

Tax Implications

Under the Income Tax Act, gifts can sometimes attract tax liabilities. For instance, if the value of the gifted property exceeds a certain threshold, it may be taxable in the hands of the donee as income from other sources.

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 per financial year).

'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.

However, gifts between certain specified relatives are exempt from tax, irrespective of the amount.

The Bottom Line: How Yellow Can Help

Registering a Gift Deed in India is a clear and structured process but requires careful attention to legal details to ensure that the deed is valid and binding.

By adhering to the legal framework, paying appropriate stamp duty, and ensuring proper registration, individuals can effectively transfer ownership of property through Gift Deeds, minimising potential disputes and fulfilling tax obligations.

Consulting with a legal expert can provide guidance and help navigate the complexities of the Gift Deed process, ensuring all legal requirements are met and the parties' interests are protected.

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.