Who doesn’t like receiving gifts? And especially if the gift is in the form of property! That’s what a gift deed is for. Although the concept of gift deeds does not exactly fall under the list of common gift ideas it still is a great way to transfer property to a loved one. Let’s take a look at what a gift deed is and what it entails.
What is a gift deed?
A gift deed is legal document that allows you to transfer your property to the intended person without monetary involvement. A gift deed, also known as a settlement deed, is a contract between the giver and the receiver specifying the voluntary transfer and acceptance of property.
What is the process of registering a gift deed?
It is crucial that a gift deed is registered under the provisions of the Registration Act of 1908 as well as the Transfer of Property Act, without which it can be a void document. The property has to be first evaluated by an expert followed by payment of stamp duty and transfer duty. The stamp duty fee varies from state to state and it is prudent to ensure it is included in the gift deed and has been paid.
What are the tax implications for a gift deed?
The giver is exempt from any tax liabilities but the receiver has some points to consider.
If the gift is immovable property without consideration then the receiver will need to pay taxes on stamp duty if the fees are above Rs 50,000. But if the property gifted with consideration then tax will be levied on the value of the property.
In case of movable property without consideration then tax will be levied on Fair Market Value exceeding Rs 50,000. If the property is gifted with consideration then tax will be levied on what remains after deducting the FMV.
The recipient can enjoy a tax-free gift deed if he or she receives it from a specified list of close relatives.
Useful points to remember
- A gift deed cannot be cancelled or revoked by the giver once registered and executed unless there are special clauses explicitly mentioned in the deed. For example, the property can be transferred back to the owner if the recipient dies within the owner’s lifespan.
- If the property given through a gift deed is sold within 36 months of receiving the money received will be considered as income and will be taxed at the appropriate slab rate.
- It is mandatory for a minimum of two witnesses to be present as well as their details to be recorded at the time of the transfer of property.
- A gift deed is valid only if the receiver accepts the property while the gifter is alive. If the giver passes away before the receiver expresses acceptance, the gift deed is made void.
- It is imperative that the gift deed is drafted completely on the free will of the giver and the receiver. Neither party can be coerced or forced into giving or accepting the property and if proved to be true in the court of law the gift deed will be void.