This article has been written by Khalid Ali Khan Afridi, a student of PSIT College of Law

• Khalid Ali Khan Afridi

The property transmitted as a gift is governed under the Indian Transfer of Property Act, 1882. A gift of property includes the execution of a gift deed to transfer ownership of one party’s property to another party. The gift deed is a legal document used to give away immovable or mobile property that has been owned by one party to another party without asking for anything in return.

The individual giving their property as a gift is referred to as the donor, and the recipient is referred to as the donee. To be considered a legal gift under the Act, the property must be given voluntarily by the donor to the donee without receiving anything in return. The donee should accept the gift within the lifetime of the donor for the legitimate validity of the gift.

GIFT DEED:

A gift deed is a valid or legally binding document obtained after the transfer of a property (by the donor) to the recipient has been approved (donee). According to Section 122 of the Transfer of Property Act of 1882, everyone has the legal right to use a gift deed to legally transfer their property to the beneficiary (donee) of their choice. A gift deed includes all the pertinent information about the property, the giver, and the donee to prevent any further loss or issues, similar to how a sale deed does. Since the gift deed simply conveys title to the beneficiary, it does not deal with financial transactions (donee).

ILLUSTRATION OF THE PROVISION: 

According to Section 17 of the Indian Registration Act of 1908, parties must register their gift deeds with the Sub-Registrar in order to legitimize them. Additionally, the Act’s Section 123 emphasizes that an unregistered gift deed will be regarded as invalid.

In addition, the holder of the registered gift deed is responsible for applying the property’s mutation. The process of mutation is essential to the real estate industry. It promotes utility connections being transferable in the beneficiary’s favour (donee). A registered gift deed must be presented by the beneficiary in order to transfer the property further.

CLAUSES IN A GIFT DEED:

• Details of Donor and Donee – The gift deed should specifically mention the name, age, address, and relationship between the donor and donee. 

• Consideration – The gift deed should specifically mention that the donor is transferring the gift property out of love and affection towards the donee, and there is no consideration of any type involved in the transfer of the property. 

• Voluntary Transfer – The gift deed should specifically mention that the donor is voluntarily and freely transferring the ownership of the gift property to the donee. The transfer shall be free of any fear, pressure, coercion or threat and the donor must be of sound mind during the transfer of the property. 

• Ownership of Property – The gift deed should specifically mention that the property is in existence and the donor is the absolute and true owner of the gift property, and the donor has delivered the possession of the property to the donee and promise that no future interference will take place in the gifted property by the donor. 

• Property Details – The gift deed should specifically mention the detailed description of the gift property. 

• Rights of the Donee – The gift deed should specifically mention the rights of the donee. It includes the rights of the donee to enjoy the property peacefully and sell or mortgage or lease the property without any interference from the donor. 

• Acceptance by Donee – The gift deed should specifically mention that the donee accepts the gift of the property without any pressure, coercion or threat being in a sound mind.

• Delivery – The gift deed should specifically mention the intention behind delivering the possession of the gift property, expressly or impliedly. 

• Witnesses – The gift deed should specifically mention the name and address of the witnesses. It should be signed and attested by at least two witnesses mandatorily.

• Revocation – The gift deed need not have a revocation clause of the gift property, but it is advisable to have a revocation clause to prevent any conflict in the future.

HOW GIFTING PROCESS WORK IN INDIA?

1. DRAFTING A GIFT DEED:

The process of gifting begins with the creation of a gift deed. It is crucial that a lawyer be involved in this situation because they will be writing the gift deed. The relevant information about the donee and the asset that is intended to be transferred is often included in the draught. It should be highlighted that gift deeds should not be used for financial transactions.

2. ACCEPTANCE OF THE PROPERTY:

According to the law’s application, the donee must take an asset or piece of property from the donor while they are still alive. The gift deed will immediately become ineffective and become invalid if the donee does not acquire the property from the donor within his or her lifetime.

3. REGISTRATION:

A gift deed that has not been registered is inadmissible under Section 123 of the Transfer of Property Act in any situation. Two witnesses are required for the attestation of the gifting process.

PROCEDURE FOR GIFT DEED REGISTRATION:

INSTRUCTIONS FOR THE REGISTERATION OF THE GIFT DEED:

1. A certified professional shall do the evaluation of the property related to the gift deed. 

2. A gift deed must be signed by the donor and the donee in the presence of two witnesses at the same period of time. 

3. Submit the signed documents to the appropriate Sub-Registrar. 

4. Hire a lawyer or advocate for the calculation of the charges of registration, including the stamp duty. You shall pay the prescribed fees to him or her.

5. Attest the deed properly. 

CHARGES FOR THE REGISTRATION OF THE GIFT DEED:

You must pay stamp duty and a registration fee to have the gift deed registered. Similar to a sale deed, the cost of gift deed registration in India is set by the relevant state government. A valuation establishes the worth of the gifted property based on the market value before the registration cost is calculated.

COSTS OF GIFT DEED REGISTRATION OF MAJOR CITIES IN INDIA:

New Delhi: 1% of the property’s market value + Rs 100 for pasting 

Banglore: 1% of the property’s market value + Rs 500 + Rs 1500 for filing and postage fees. 

Mumbai: Rs 200 for donee having family and Rs 30,000 or 1% of the property’s market value for non-family member donee.

Chennai: 1% of the property’s market value. 

WHAT CAN BE GIFTED? 

A GIFT SHALL HAVE THE FOLLOWING PROPERTIES: 

1. The gift deed shall specifically mention the existing movable and immovable property. 

2. Gift deed shall be tangible and transferable in nature.

TAX IMPLICATIONS OF GIFT DEED:

After April 1, 2017, gifts are subject to taxation under Section 56(2)(x) of the Income Tax Act of 1961. A person is subject to taxation under the heading of “Income from other sources” under Section 56(2)(x)(a) if they receive a sum of money that exceeds Rs. 50 000 (Fifty Thousand) without considering it to be a gift.

According to Section 56 (2) (x) (b), the stamp duty value of an immovable property is taxable in the hands of the donee when it is received as a gift and the stamp duty value of the gift deed exceeds Rs. 50 000 (Fifty Thousand).

However, if the property or amount is received from any of the below mentioned persons, then there is exemption from the taxation on the gift (the donee will not be taxed):

1. If the gift is received from relatives, or

2. If it is received on the occasion of the marriage of the individual, or

3. If it is received under a will or by way of inheritance, or

4. If it is received in contemplation of the death of the donor, or

5. If it is received from a local authority (defined in Explanation to Section 10 (20) of the Income Tax Act, or

6. If it is received from any fund, university, foundation, other educational institution, other medical institution, hospital, trust or institution referred under Section 10 (23C) of the Income Tax Act, or

7. If it is received from any trust or institution registered under Section 12A or 12AA, or

8. If it is received by an individual (donee) from a trust established or created solely to benefit the individual’s relative.

CONCLUSION:

The gift deed is solely for adults; minors are not permitted. A minor cannot transfer property to another individual because they are prohibited from entering into contracts by the ordinances. But in this specific instance, the identical law has a different proposition for the donee. If the donee is a minor, the gift may be accepted on their behalf by their guardian. Until the donee reaches the age of majority, the guardian will continue to pursue the steps for registering the gift deed and adhere to sole ownership responsibilities.

SOURCES:

1. The Transfer of Property Act, 1882
2. The Indian Registration Act of 1908
3. The Income Tax Act, 1961
4. https://cleartax.in
5. https://corpbiz.io
6. https://housing.com

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