Stamp Duty & Registration Charges on Gift Deeds: Rates, Exemptions & Key Rules

To legalise a gift, it needs to be executed on a gift deed and registered. A stamp duty must be paid on the gift deed to ensure the transfer is legitimate and accepted under the law. Read on to learn more about:

• What are the stamp duty and registration charges on a gift deed?
• Stamp duty when a gift is made to blood relatives
• How to calculate stamp duty on a gift deed?

What is Stamp Duty on a Gift Deed?

A stamp duty on a gift deed is a tax on property transfer as a gift. It is determined in terms of the market value of the property and the relationship of the giver to the receiver. The status of the donor (giver) and donee (receiver) tends to determine the stamp duty rate applicable. Generally, closer relatives may be eligible for lower rates or exemptions. 

A stamp duty has to be paid to make the gift deed legally valid. Arrears in payment can attract penalties and render the transfer invalid. This tax ensures the government gets income from transactions over property, including those not involving money.

List of Properties Transferable Through Gift Deed

A gift deed allows for a transfer of immovable or movable properties without the exchange of money. However, not all properties can be transferred through a gift deed. The following is a list of properties commonly transferable utilising a deed of gift:

Immovable Property

• Land, buildings, and apartments are included here. 
• Ownership transfer of such properties is one of the most common uses of gift deeds, particularly between relatives.

Movable Property

• This includes tangible property such as cars, jewellery, stocks, and bonds. Although rare, they can be given through a deed.

Existing Property

• Only the present properties that a donor owns can be given as a gift. 
• Contingent or future properties cannot be gifted through a deed.

Rules on Gift Deeds 

The rules on gift deeds are provided in the Transfer of Property Act of 1882 in India. The following gift deed rules are uniformly applicable throughout India:

• Details of Donor and Donee: The deed must include the donor and donee’s names, addresses, and their relationship.
• Voluntary Transfer: The transfer has to be voluntary, i.e., done without coercion and undue influence.
• Property Ownership: The donor has to have clear and legal ownership of the property.
• Property Details: A precise description of the property must be included.
• Consideration: It should explicitly state that the transfer is out of love and affection, with no financial exchange.
• Acceptance: The donee must accept the gift in the lifetime of the donor.
• Registration: Registration is compulsory in the case of immovable property under the Indian Registration Act of 1908.
• Stamp Duty: Stamp duty must be paid, and the amount varies enormously from state to state.
• Existing Property: Only existing properties can be gifted; future or contingent properties cannot be gifted.
• Rights of the Donee: The donee has the right to use, sell, lease, or mortgage the property.
• Delivery of Possession: The deed should specify how possession is transferred.
• Witnesses: At least two witnesses must sign and attest to the deed.
• Revocation Clause: While optional, including a revocation clause can prevent future disputes.

Stamp Duty & Registration Charges of Gift Deed

The stamp duty rates vary based on location and government regulations. Here is a list of stamp duties on gift deeds of property applicable to different states in India:

Stamp Duty on Gift Deed of Property

The stamp duty on a property gift deed varies depending on factors like the property's market value, the relationship between donor and donee, and the state-specific rates. The gift deed charges are often lower for gifts to close relatives. It can be a percentage of property value or a fixed amount.

The registration charges on a gift deed are the fees for registering the gift deed. It depends on the property’s location and state-specific rates. These charges are a fixed fee or a small percentage of the property value. 

Stamp Duty on Gift Deed in Blood Relation

A gift deed in a blood relationship is a legal document to transfer property between family members without consideration (money). The process ensures that wealth remains in families and prevents possible conflicts. 

However, stamp duty is payable depending on state requirements and is needed to legitimise the transfer. Certain states provide reduced charges or exemptions for gift deeds in blood relationships, such as parents, siblings, or children, to encourage family asset transfer and social well-being.

Stamp Duty on Gift Deed from Husband to Wife

A deed of gift is a legal document used to transfer property ownership from one person to another without any exchange of money. When a husband gifts property to his wife, the process must follow specific legal formalities to ensure validity. 

A property gift deed between a husband and wife allows for legal transfer of property between the spouses. However, the required stamp duty payment must be paid and it must be registered to make the gift deed valid and legally enforceable.

How to Calculate Stamp Duty on a Gift Deed?

Calculating stamp duty on a gift deed of property involves several factors. The property's market value and the donor-donee relationship are included primarily. The stamp duty is a percentage of the property's market value, with potential reductions for gifts to close relatives.  

Here is a simplified example:

Let us consider that a father in Karnataka donates a property worth Rs. 50,00,000 to his son. Assume that the stamp duty applicable by the state on such a transfer is 5% of the property's value.

Calculation of stamp duty:

Stamp duty = 5% of Rs. 60,00,000

                   = (5/100) x 60,00,000

                   = Rs. 3,00,000

Thus, stamp duty would be payable on Rs. 3,00,000. In addition, registration charges would be imposed, typically a lesser fixed amount or percentage.

How to Pay Stamp Duty on a Gift Deed?

Payment of stamp duty on the gift deed is necessary to make it legally valid. The quantum varies with the property’s market value, state rates, and the relation between the donee and donor. However, not paying the proper stamp duty can make the deed invalid legally.

Here is the procedure to pay stamp duty:

• Get the value of the property from the sub-registrar's office or a certified valuer. It varies from state to state, which is usually lesser for close family members.
• Compute the stamp duty for the gift deed using the formula: Stamp Duty = Market Value × Stamp Duty Rate (%). 
• Pay using e-stamping, physical stamp papers, or franking at designated banks.

Documents Required for Gift Deed Registration

Registering a gift deed requires specific documents to ensure legal compliance. Below is a list of essential documents required for gift deed registration:

• Original Gift Deed: The adequately drafted and signed document.
• Identity Proof: Aadhaar card, PAN card, or driving license for the donor, donee, and two witnesses.
• Ownership Proof: Documents proving the donor’s ownership, such as a sale deed or property tax receipt.
• Passport-Size Photos: For both donor and donee.
• Witness Address Proof: Utility bill, Aadhaar, or other valid proof for two witnesses.
• Encumbrance Certificate: This verifies that the property is free from legal liabilities.
• NOC (No Objection Certificate): Required for agricultural land transfers.

Taxability on Gift Deed

In India, the taxability of gifts is regulated under the Income Tax Act. If any person receives money of more than Rs. 50,000 as a gift, the whole amount is taxable under the head's Income from Other Sources. 

For any immovable property where the stamp duty is above Rs. 50,000, the stamp duty value of the property is taxable. If any movable property is received as gift where the value is more than Rs. 50,000, the value of the property is taxable.

Gifts received from certain relatives are exempted from tax. Such relatives are spouses, siblings, parents, and other lineal ascendants or descendants. Also, gifts on the occasion of marriage or inheritance are exempted from tax. They are entirely exempt without constraint of any amount. 

How to Revoke a Gift Deed?

In India, the cancellation of a gift deed is regulated by Section 126 of the Transfer of Property Act of 1882. Once executed, accepted, and acted upon, a gift deed usually becomes irrevocable. There are certain situations, however, where a gift can be suspended or cancelled:

• Mutual Consent regarding Contingent Events: Donor and donee can mutually consent that the gift will be suspended or cancelled upon the happening of a defined event, subject to the condition that such an event is not dependent on the will of the donor alone. 

For example, if the parties mutually consent that the gift shall go back to the donor in case the donee dies earlier than the donor, such a condition would hold good in law.

• Rescission Analogous to Contracts: A gift can be revoked in the case where if it were a contract, it would be rescinded, except in instances of failure or lack of consideration. This means that fraud, misrepresentation, undue influence, or coercion are reasons for revocation.

It is also important to know that a gift cannot be retracted just according to the pleasure of the donor. Any gift deed cannot be revocable by the donor alone. Thus, when preparing a gift deed, it is essential to specify any suspensive and revocatory conditions clearly to make it enforceable and prevent future conflicts.

Knowledge of what stamp duty is on gift deeds helps to maintain a legally correct and trouble-free property transfer. Gifts of property to a member of the family or others must be handled with knowledge about applicable tax charges, legal stipulations, and the registration process to avoid unnecessary trouble. Accurate paperwork and timely settlement of duties ensure the protection of your rights.

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