A gift deed is an agreement used when a person wishes to gift his/her money or property to someone else. Using gift deeds, a movable or immovable real estate can be gifted voluntarily, from the donor to the donee. A gift deed allows the property owner to gift the property to someone else and prevent any future disputes arising out of succession or inheritance claims.
It is important to note that a registered gift deed is also a piece of evidence in itself, and unlike in the case of a will, the transfer of property is immediate, and you'll not be required to go to a court of law for the execution of the gift deed. And hence, gift deeds also save time.
This is just an overview of gift deeds in India. Let us now start with the article and uncover 5 things everyone needs to know about gift deeds.
1. Drafting Gift Deed
The draft of a gift deed must involve the following information:
Date and place where the gift deed is to be executed
Related information on the gift deed regarding the donor and the donee, like their name, address, DOB, relationship, and signatures.
Complete information about the property for which the gift deed is being drafted
Two witnesses to bear testimony of the gift deed and their signatures
Besides this, depending on the value pre-determined by the state government, the gift deed in India must be printed on stamp paper after paying the required fees. Also, you must know that the gift deed must be registered at the office of the registrar and sub-registrar.
2. Critical Clauses to Mention
Some of the critical clauses that must be a part of the gift deed format include the following:
There is no money or force involved: This is a consideration clause of the gift deed that you must not forget to add. It must be duly indicated that there isn't any exchange of money and that the git deed is made completely out of affection and love and not due to force or money.
You are the property owner when you gift: Only the property owner can give you a property. If you are not the title holder or property owner, you can't give a property as a gift deed to someone else, even in anticipation.
Describe the property: All the details related to the property, like the type of property, structure, area, address, location, etc., must be clearly stated in the property gift deed format.
Mention liabilities: If there are any sort of liabilities or rights attached to the property, such as whether the donee can lease or sell the property, all such clauses must be mentioned in the gift deed format.
Relationship between the donor and the donee: In case the donor and the donee are blood relatives, some state governments might offer a concession on stamp duty. Also, it is important to establish the relationship between the donor and the donee in the gift deed format.
Delivery clause: The delivery clause in the gift deed states the implied or express action of delivery of possession of the property.
Revocation of the gift: The donor can also state clearly if he/she is willing to have a revocation clause be adhered to by the gift deed by the donee. Both the donor and the donee must agree on this clause.
3. Income Tax on Gift Deed
Gift deeds in India have to be declared in the Income Tax Returns (ITR). In 1998, the Gift Tax Act of 1958 was abolished just because it was reintroduced in 2004. Therefore, if you've been gifted an immovable property as a gift deed, you'll have to pay tax if the stamp duty value exceeds Rs. 50000 and if the property is received without any critical consideration.
For instance, if the consideration is Rs. 1.5 lacs while the stamp duty was Rs. 4 lacs, the difference between the two exceeds Rs. 50000.
4. Tax Exemption for Gift Deed in India
If the property has been received from any of the following, then the above-stated clause won't apply, and the donee will not be taxed:
If the gift deed is received on the occasion of the marriage of the person.
If the gift deed is received from relatives by a person or from a member of a HUF.
If the deed is received in contemplation of the death of the donor or payer.
If the gift deed is received through inheritance or under a will.
If the deed is received from a local authority.
If the gift deed is received from an institution or trust registered under Section 12AA.
If the deed is received from any foundation, fund, university, hospital or educational institution referred to in Section 10(23C).
5. Revocation of Gift Deed
Once the real estate is gifted lawfully, it entirely becomes the donee's and can never be revoked easily. However, as per Section 126 of the Transfer of Property Act, 1882, revocation of the gift deed might be allowed under certain situations stated below:
If it is found that the grounds of the gift deed in India were illegitimate, immoral, or reprehensive.
If the gift deed was made out of fraud or coercion.
If it is agreed upon from the start that the gift deed is revocable under certain situations.
In all these cases, even in the case of the donor's death, his/her legal heirs can move further with the gift deed revocation.
Frequently Asked Questions (FAQs)
1. Can you sell a property received as a gift deed?
If there were no terms and conditions attached to the gift deed and provided you've registered the gift deed; you can easily sell the property without any doubt.
2. Can a property be gifted to a minor or a person below 18 years of age?
If the property is being gifted to a minor as a gift deed, his/her legal guardians must duly accept it on behalf of the minor. Also, after attaining legal age, the minor might accept or return the gift if he/she opts to do so.
3. Will I have to pay something in return for the property received as a gift?
No, a gift is a gift by all means. The only charges borne by the donor are the registration and stamp duty charges and other minimal charges that crop up because of formalities and legalities attached to the gift deed. However, in case the property value exceeds Rs. 50000, you might have to show it in your Income Tax Return depending on who you received it from.