A gift deed, as defined in Section 122 of the Transfer of Property Act, 1822, is a legally binding written document by which the donor can voluntarily transfer an existing movable or immovable property to the donee. A gift deed is only acceptable when it is given ‘without any consideration’ in return by a family member or friend to another. According to Section 17 of the Registration Act of 1908, if you want to transfer immovable property, you must have a registered gift deed.
Contributor and Donee Proof
The gift deed of property needs to specify the donor and donee’s names, addresses, and relationships. Regarding consideration, the gift deed should specify that the donor is transferring the property to the donee out of ‘love and devotion’ and that no other kind of payment is being made to ease the transfer.
Voluntary Transfer
The gift deed of property should specify that the donor is freely and voluntarily transferring the donee ownership of the gift property. There must be no threats, pressure, or intimidation during the transfer.
Proprietor of Property
The gift property should be described in the deed as being actual, owned solely by the donor, and transferred to the gift recipient.
Property Specifications
A thorough description of the gift property should be included in the gift deed.
Rights of the Donee
The donation deed needs to include the donee’s rights. It specifies the donee’s rights to the property, including the freedom to sell, encumber, or lease it.
Acceptance by Donee
It should be included in the gift deed of property has been accepted by the donee.
Delivery
The intention to transfer ownership of the gift property must be stated explicitly or implicitly in the gift deed of property.
Witnesses
The donation paperwork should contain the names and addresses of the witnesses. It must be signed and witnessed by a minimum of two witnesses.
Revocation
The gift deed does not need to contain a revocation clause for the delivered property.
Gifts given after 1 April 2017, are taxable under Section 56(2)(x) of the Income Tax Act of 1961. Any person who receives a sum of money higher than ₹50,000 as a gift without obtaining any other benefits is liable to taxation in the donee’s hands under the heading ‘Income from other sources’, as stated in Section 56(2)(x)(a).
When an immovable property is received as a gift and the stamp duty value of the gift deed of property exceeds ₹50,000, Section 56(2)(x)(b) states that the stamp duty value of the immovable property is taxable in the donee’s hands. If the asset or money is received from any of the following people, however, the taxation on the gift is exempt and the donee will not be charged tax:
If a gift was given by relatives
If it is received in conjunction with the person’s marriage, or
If it is obtained through a will, an inheritance, or
If it is accepted with the donor’s death in mind, or
if it originates from a local authority as defined in the Section 10(20) of the Income Tax Act’s explanation
If it originates from a fund or trust that is listed under Section 10(23C) of the ITR Filing
If it originates from a trust or organisation that is permitted to conduct business by virtue of Section 12A or 12AA
If a person (donee) receives it from a trust that was set up or made just for the benefit of the person’s relative.
When it comes to gift deed registration, it is important to note that they must be declared in your Income Tax Returns (ITR). While the Gift Tax Act of 1958 was abolished in 1998, it was reintroduced in 2004. Itmeans that if you receive an immovable property as a gift deed, you may be required to pay taxes if its stamp duty value is more than ₹50,000 and if the property is received without adequate consideration. For instance, if the consideration is ₹1.5 lakhs but the stamp duty is ₹4 lakhs, the difference between the two values exceeds ₹50,000 and may be subject to taxation.
The benefits of a gift deed are illustrated in the section that follows.
The gift deed registration process is simple, when both the beneficiary and the donor agree to transfer, a gift deed is completed
A registered gift deed is not subject to litigation
Gift deed property transfers are not subject to tax obligations.
1. Property with Movable or Immovable Nature
2. Tangible Property
3. Property Eligible for Transfer
4. Existing Property