Your Most Asked Questions on the Gift Deed

Shradha Goyal, a 28-year old tech professional, received an apartment as a gift from her father during her wedding. The transfer of the property happened with a Gift Deed. This is quite common in India. In fact, many Indians buy a property to gift it to their children.

We spoke to our legal expert to understand the financial implications of gifting a property and got some commonly asked questions answered. Here are the excerpts.

What is a Gift Deed?

The Gift Deed is a legal document that describes a voluntary transfer in the form of a gift from a donor (owner of the property) to the donee (receiver of property) without any exchange of money. It is defined under Section 122 of the Transfer of Property Act, 1882, which also states that any immovable property can be transferred through a gift deed.

What type of properties can be gifted?

Any property that is transferable can be gifted.

Can you gift a property you expect to own in future?

No. As per the law, the property must exist at the time of gifting.

What is the procedure to gift a property?

There are broadly three parts in gifting a property:

Step 1: Drafting the gift deed

Your lawyer will draft a gift deed with the details of the donor and the donee.

Step 2: Acceptance

The next step is to accept the gift. It is a legal requirement. Failure to do so will render the gift deed invalid. The acceptance must be validated by acts such as taking possession of the property.

Step 3: Registration

After the acceptance of the gift, the property must be registered in the sub-registrar’s office.

What if the donee is a minor?

In such a case, a guardian can accept the gift on his behalf. The guardian acts as the manager of the gifted property. Once the donee is an adult, he must either accept or return the gift.

How is the Gift Deed different from the Sale Deed?

Well, there is not much of a difference. The Gift Deed is similar to the Sale Deed. However, as mentioned above, there is no exchange of money. Under Section 17 of the Registration Act, 1908, and as per section 123 of the Transfer of Property Act, the property must be registered with the sub-registrar.

How is it different from a Will?

The Gift Deed is executed during the lifetime of the donor and transfer happens immediately. In a will, the transfer occurs after the death of the owner. Additionally, the Gift Deed needs to be registered. Transfer using Gift Deeds are tax-free.

The Gift Deed is irrevocable post-execution. However, the will can be changed as many times as you want. There is an extra cost in the form of stamp duty in case of a Gift Deed.

Can the Gift Deed be revoked?

A gift cannot be revoked unless there is an agreement between the contracting parties stating that the gift can be withdrawn on the occurrence of particular events. Thus, it is advisable to add a clause of revocation while executing the Gift Deed.

Section 126 of the Property Transfer Act describes the situations wherein the donor may revoke a Gift Deed.

What about the tax implications?

As per the income tax law, the gifts received by a person during a year is fully exempt, provided the value does not exceed Rs 50,000 in a year. In the value exceeds Rs 50,000 in a year, then the gift will be taxable as income from other sources.

However, Section 56 (2) (vii) of the Income Tax Act, 1961, states that a gift is not taxable if an individual or Hindu undivided family receive it from any blood relative or as inheritance or at the time of marriage or in contemplation of death.

But if the value of the gifts received exceeds Rs 50,000 in a year, then it will be taxable as income from other sources.

What if somebody wants to gift the cash gained from the sale of the property?

In such a scenario, the recipient might have to pay taxes if he or she is not your relative. As mentioned above, any gift exceeding the value of Rs 50,000 per year attracts taxes under income from other sources. But if the amount is transferred to, let’s say your son (or any other blood relative), he will not be liable to pay any taxes.

What if somebody wants to gift a property after his/her demise?

Well, then a will is a better option.

Who pays the dues after a property is gifted?

Once the property is registered in the name of the recipient, he is responsible for paying the remaining dues. Let’s assume, Ram got an apartment from his father. His father had to pay Rs 20,000 as utility bills. Now, Ram will be liable to clear the remaining dues.

Got some more questions? Tell us in the comments below, and we will get those answered by our legal expert!