What is Gift Deed

A gift deed is a legal document through which a donor willfully gives his assets to the recipient. These can be property or assets, or even money, that are transferred or offered as gifts to the donee with no financial (money) interest paid to the donor. The person who makes the donation must also be financially stable and not give such gifts in the hope of gaining illegal profits or avoiding tax.

The donor must be the sole rightful owner of the property prior to beginning the Gift Deed Conveyance. After that, once the donee agrees to the donation presented by the donor, they become the ultimate owner of the property. The donor will no longer hold any rights to the property.

If there are mortgages or liens on this property, a no-objection certification (NOC) obtained from the lender is required to register the gift Deed.

Giving gifts to family members such as mother, father, spouse, husband, son, daughter, sister-in-law, brother-in-law, and grandchildren will attract the lowest amount of stamp duty.

What are the steps to draft a gift deed of property?

There are generally three components when it comes to gifting a property

Step 1: Drafting the gift deed

Your lawyer will create a gift deed that includes details of the donor as well as that of the donee.

Step 2: Acceptance

The next step is accepting the gift. It’s legally required. If you fail to comply, it could make the gift deed ineffective. The acceptance must be confirmed through acts like getting possession of the property.

If a person wishes to make an inheritance through a Gift Deed, the following requirements need to be met:

1. The person making the gift from pure feelings of love and sentimental
2. The decision shouldn’t be interpreted as being made under pressure.
3. There shouldn’t be any exchange of cash in the process.
4. The donor may make a Gift and should be able to make a gift (should be more than 18 years old and be able to think clearly)

Step 3: Registration

Once the donation has been made, the property needs to be registered with the office of the sub-registrar.

While there isn’t an exchange of money during the process, the registration of the Gift Deed is required for an effective conveyance of real property. Two witnesses must be present at the time of registration and must also sign the Gift Deed. When the registration process is completed, the transfer of title can be completed. Stamp duty of the recommended amount is required for registration of the Gift Deed. The Stamp duty costs vary from state to state and are also determined by gender.

What Does A Gift Deed Include?

The Gift Deed should contain the following information:

1. Date and place of the gift Deed
2. Details of the Donor (Name, Father’s Name, Date of Birth, Address)
3. The donee’s details (Name the Father’s Name Date of Birth Address, Relationship with Donor)
4. Relationship between the Donor and the donee
5. The details of the property that is being gifted
6. Signatures of Donor and Receiver
7. Two witnesses’ who were present when the act was carried out
8. Signatures of witnesses

What Are The Essentials Of A Valid Gift Deed?

In order to make the Gift Deed valid, one must ensure that the following requirements are met:

1. The donor is required to make the donation in his capacity and without no obligation to pay
2. The donor must accept the gift in the course of the life of the donor.
3. The person who is donating should be 18 years old and have a clear mind
4. The gift should be tangible
5. The gift must be transferable
6. The gift should be an existing property and not the future property
7. The gift should be registered as a property
8. The Gift Deed must have the signatures of both parties (donor and recipient)
9. The Gift Deed must be signed by two witnesses
10. Gift Deeds should be registered in accordance with the Indian Registration Act, 1908

Can a gift deed be cancelled?

The gift cannot be cancelled. Once the donor has made the property or gift to the recipient, it is not possible to request to return the same since it isn’t legally permissible. There are certain circumstances that are allowed by law that allow gifts to be removed.

Can a gifted property be cancelled?

The gifted property is only cancelled through the process that is ruled by the court. In this instance, the giftee must demonstrate that the gifted property was acquired through fraud or misrepresentation. The donor must contest the case in court, or any of his relatives can argue on his behalf.

Taxation on gifts

In the past, in India, there was a gift tax law existed, which was a tax that had to be paid on the value given. This law has since been repealed. In the Financial year 2004-2005, the new provision related to gift tax was added to the income tax (1961) law in section 56 (2). In accordance with this act, gifts that an individual receives or the Hindu undivided family member from relatives or inheritances received in marriage or as a result of contemplating death will not be tax-deductible. In any other scenario, a gift received in excess of 50000 Indian rupees is tax-deductible as income under the heading of other sources.

How is a Gift Deed different from the Sale Deed?

There isn’t any distinction. A Gift Deed is identical to that of the Sales Deed. As mentioned previously, there isn’t any exchange of money. Section 17 in the Registration Act of 1908 and in accordance with Section 123 in the Transfer of Property Act, and the property must be registered at the Sub-Registrar.

What makes a gift deed different from a Will?

A Gift Deed is executed during the life of the donor, and transfer occurs immediately. If a will is in place, the transfer occurs upon the beneficiary dies. Furthermore, it is necessary that the Gift Deed needs to be registered. Transfers with gift Deeds can be tax-free.

It is important to note that the deed of gift is irrevocable post-execution. The will, however, can be altered as often as you wish. There is an additional cost in the form of stamp duty for a Gift Deed.

What happens if a person would like to give the cash earned from the sale of the property?

In this scenario, it is possible that the recipient will be tax-exempt if the recipient is not a relative of yours. In the above paragraph, every gift that exceeds the value of Rs.50,000 annually is tax-deductible on income earned that comes from different sources. If the gift is given to, for example, say, your daughter (or any blood relatives), then he won’t be subject to any taxes.

Who pays the bills after the gift of property?

When the property is registered under the name of its owner, the recipient is accountable for the remainder of the dues. Let’s suppose that Ram was given an apartment by his father. The father was required to pay a sum of Rs 20,000 in utility bills. Then, Ram will be liable to pay the rest of the dues.