What is Gift Deed?

Gift-giving is a cherished tradition in Indian culture, symbolizing generosity and goodwill. When it comes to gifting immovable or movable properties, the process must be legally formalized through a Gift Deed. This document ensures a seamless property transfer while minimizing future disputes. Here's a detailed guide to understanding Gift Deeds and the applicable stamp duty across Indian states.

What is a Gift Deed?

A Gift Deed is a legal document used to voluntarily transfer ownership of property, either movable or immovable, from one individual (the donor) to another (the donee). Unlike a 'Will,' a Gift Deed takes effect immediately upon registration, granting the recipient legal ownership.

Key Features:

• The transfer is done voluntarily and without monetary consideration.
• It requires mandatory registration under the Indian Registration Act, 1908.
• Both donor and donee must be present at the time of registration.

Properties Transferable Through a Gift Deed

1. A Gift Deed can be used for transferring:

• Immovable Properties: Land, houses, or apartments, excluding growing crops or timber.
• Movable Properties: Jewellery, vehicles, or cash.

2. Conditions for Valid Transfer:

• The donor must have clear and legal ownership of the property.
• The transfer must be immediate, without any future contingencies.
• The property must be tangible and transferable.

Advantages of a Gift Deed

1. Legal Validity: Acts as legal proof during disputes.
2. Tax Benefits: Offers tax exemptions under certain conditions.
3. Immediate Effect: Transfers ownership instantly, unlike a 'Will.'
4. Revocation Clause: Allows cancellation under specific legal grounds.

Registration Process for a Gift Deed

1. Document Preparation: Include all relevant details like donor/donee information, property details, and witness signatures.
2. Stamp Duty Payment: Pay the applicable stamp duty based on the property's location and value.
3. Registrar Visit: Both parties and two witnesses must visit the registrar's office for verification and deed execution.
4. Registration Certificate: Post-verification, the registrar issues the certificate, completing the process.

Documents Required for Gift Deed

• Identity proofs (PAN card, Aadhaar card).
• Property ownership proof.
• NOC (if agricultural land is involved).

Stamp Duty on Gift Deed in Indian States

Stamp duty is a critical component of Gift Deed registration and varies by state. Below is a snapshot of the stamp duty rates across major states:

Note: Rates are indicative and may vary based on property location and government updates.

Tax Exemptions on the Property as a Gift 

The Income Tax Act, 1961 governs the taxability of gifts in India. While certain gifts may attract taxes, specific exemptions are provided for transactions under a Gift Deed. Below are the key scenarios where tax exemptions apply:

1. Gifts Received from Relatives

Gifts received from specified relatives are exempt from tax, irrespective of the value. As per Section 56(2)(vii) of the Income Tax Act, the following relations qualify:

• Parents
• Spouse
• Siblings
• Siblings of spouse
• Lineal ascendants (grandparents) and descendants (children, grandchildren)
• Lineal ascendants and descendants of the spouse

2. Gifts Received on Special Occasions

Gifts received on the following occasions are fully exempt from tax, provided they are not from an employer or unrelated persons:

• Marriage of the donee
• Inheritance (under a Will or by way of succession)
• Property transferred in contemplation of death

3. Monetary Threshold for Taxability

If the total value of gifts (from non-relatives) during a financial year does not exceed ₹50,000, the amount is not taxable. However, if the combined value crosses this limit, the entire amount is taxable under "Income from Other Sources."

4. Property Gifted Without Consideration

Tax exemption applies if immovable property is gifted to a relative or received under the exempted occasions mentioned above. For non-relatives, the gift is taxable if the stamp duty value exceeds ₹50,000 and is considered as income in the hands of the recipient.

5. Agricultural Land Transfers

If agricultural land is transferred as a gift to a family member or as part of inheritance, it is exempt from taxation.

6. Charitable Donations

Gifting property or money to registered charitable or religious organizations may qualify for tax deductions under Section 80G, subject to specific conditions.

Important Rules to Remember

• The gift must be voluntary and without any monetary transaction.
• Both parties should be of legal age and present during registration.
• Only existing properties can be gifted; future interests are not allowed.
• Registration ensures legal enforceability and protects against disputes.

How to Revoke Gift Deed?

According to Section 126 of the Transfer of Property Act, 1882, a Gift Deed can be cancelled under the following conditions:

1. Mutual Agreement:

• Both the donor (giver) and the donee (recipient) agree to cancel the Gift Deed.
• The cancellation agreement must be documented and registered.

2. Revocation Clause in the Deed:

• If the original Gift Deed contains a revocation clause, the donor can cancel the gift upon fulfilling the conditions mentioned in the clause.

3. Fraud, Coercion, or Undue Influence:

• The donor can revoke the Gift Deed if it was executed under fraud, coercion, or undue influence.
• The donor must prove these allegations in a court of law.

4. Failure of Conditions:

• If the Gift Deed was conditional (e.g., the donee must take care of the donor) and the conditions are not met, the donor may revoke it.

Steps to Cancel a Gift Deed

1. Review the Gift Deed

• Check if there is a revocation clause or any conditions that allow for cancellation.
• If no such clause exists, cancellation may only be pursued through legal proceedings.

2. Mutual Agreement

• If both parties agree to cancel the deed, draft a Revocation Deed.
• Register the Revocation Deed at the registrar’s office where the original Gift Deed was registered.

3. File a Legal Suit

• If the donee does not agree to the cancellation, the donor must file a suit in the Civil Court.
• The court will evaluate the case based on evidence, such as fraud, coercion, or breach of conditions.

4. Obtain Court Order

• If the court finds the cancellation justified, it will issue an order to revoke the Gift Deed.
 • Submit the court order at the registrar’s office to update property records.

5. Update Property Records

• After cancellation, ensure the property records are updated to reflect the change in ownership status.

Documents Required for Gift Deed Cancellation

1. Original Gift Deed
2. Proof of fraud, coercion, or breach of conditions (if applicable)
3. Identity proofs of both donor and donee
4. Revocation Deed (if mutually agreed)
5. Court order (if applicable