Updated on: Apr 14th, 2022
10 min read
In India, property transfers as gifts are governed by the Transfer of Property Act, 1882 (“Act”). A gift of a property involves transferring the ownership of one’s property to another person by executing a gift deed. The gift deed is an instrument through which the immovable or movable property owner transfers his/her property to another person without consideration as a gift.
The person gifting his/her property is called the donor, and the person accepting the gift is the donee. The donor must voluntarily gift the property to the donee without considering the gift to be valid under the Act. The donee should accept the gift within the lifetime of the donor for the gift to be legally valid.
The gift of immovable property will be effective when the gift deed is registered with the appropriate Registrar or Sub-Registrar. The gift of movable property is effective when the gift deed is registered or by delivery of the property. When the gift deed is registered, the transfer of the property from the donor to the donee takes place immediately, and the parties need not go to court for its execution.
Registration of the gift deed is mandatory when the donor wishes to gift immovable property to the donee. A gift deed must be executed out of love and affection towards the donee without any consideration in return.
There are two parties in a gift deed, i.e. donor and donee. The donor is the person who gifts his property, and the donee is the person to whom the property is gifted. The donor should have a sound mind and must be competent to enter into agreements at the time of making the gift.
A minor is incapable of gifting property as he/she is incapable of entering into agreements. However, the guardian of a minor can accept the gifts given to a minor on his/her behalf. The donor should make a gift without any consideration, i.e. the donor should not receive anything from the donee for making the gift.
Both immovable and movable properties can be given away as gifts by the donor to the donee. Immovable property means land or any benefits arising out of land or anything attached to the earth but does not include growing crops, standing timber or grass. The properties that are not considered immovable properties are considered as movable properties.
However, the donor can gift only the properties that are existing at the time of registering the gift deed. He cannot gift the property which he expects or will get in future. The donor can gift only the properties of which he/she is the lawful owner. The donor must be owning the property of the gift at the time of making the gift.
Under Section 123 of the Transfer of Property Act, 1882, the gift of immovable property is valid when gifted through a registered gift deed signed by the donor and the donee and attested by two witnesses. The gift of movable property is valid when gifted under a registered gift deed or by giving delivery of the property to the donee.
For registration of the gift deed, the gift deed containing all the clauses (as mentioned above) must be drafted on stamp paper. The donor and donee should sign on all pages of the gift deed and must be attested by at least two witnesses. The donee must accept the gift in the lifetime of the donor and when the donor is of sound mind for it to be valid.
The value of the stamp paper on which the gift deed is executed varies from state to state. The gift deed executed on the stamp paper should be registered at the Registrar or Sub-Registrar’s office under whose jurisdiction the property to be gifted is situated. If the property is movable, the jurisdiction of the Registrar or Sub-Registrar’s office is the place where the donor resides.
Gifts are taxed under Section 56(2)(x) of the Income Tax Act, 1961, after 1 April 2017. Under Section 56(2)(x)(a), when any person receives a sum of money exceeding Rs.50,000 without consideration as a gift, then the whole of the gift amount will be taxed in the hands of the donee under the head ‘Income from other sources’.
Under Section 56(2)(x)(b), when a person receives an immovable property without consideration as a gift, and the stamp duty value of the gift deed exceeds Rs.50,000, then the stamp duty value of the property is taxable in the hands of the donee.
However, if the property or amount is received from any of the following persons, then the taxation on the gift is exempted, and the donee will not be taxed:
Yes, stamp duty must be paid on the gift deed. The amount of stamp duty and registration charges payable are usually the same as in the case of a regular sale. However, if the gift deed is executed between some specified close relatives, certain states provide concessions in stamp duty.
If the donee pays the stamp duty, it can amount to consideration (price) paid by the donee for the gift under the Transfer of Property Act. Since there cannot be a consideration in a gift deed, the deed may be considered void when the donee pays the stamp duty. So, the donor is responsible for paying the stamp duty.
The donor can revoke/cancel a gift transaction through a provision mentioned in the gift deed or by mutual understanding between the two parties or upon the happening of an event mentioned in the deed. A gift transaction can also be cancelled if the donor signed the deed under undue influence or coercion.
Attestation of a gift deed by two witnesses means that the witnesses who sign the deed should have seen the donor signing the gift deed, and they should sign as witnesses in the presence of the donor and donee.
Yes, when there are many donees, and one of them does not accept it, the gift is valid in respect of the donees who accept it. However, the gift is void regarding the person who does not accept it.
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