Gift deed: Detailed guide on Format, Registration, & Clause

Any gift can bring a smile to your face. Isn’t it?

A gift comes in all forms and shapes. They can be movable and immovable. I am sure you have come across a person who has received an immovable gift called a gift deed.

Some of you who are unfamiliar with this term might think, what exactly is a gift deed? Read till the end to understand everything related to the gift deed.

What is a gift deed?

A gift deed is a form of a document that gives the original property owner an option to voluntarily give away any property of theirs to a person, trust organization, or party in the form of a gift. The law has recognized this document as a legal document that may counter any claims raised in court otherwise.

This article will break down all the essential pieces of information you need to know about gift deeds.

Check out a Gift Deed sample from here!

Who is eligible to gift a deed?

To provide a legalized gift deed and document it in the eye of the law, the donor should be a competent person. As per the law, a minor cannot become a donor. However, a recipient need not fall under that category.

The recipient can be a minor with a natural guardian identified as a nominee. The guardian, in such cases, shares the ownership by managing the property until the donee reaches adulthood. In this scenario, the beneficiary should be alive during the transaction; otherwise, the gift deed will become invalid.

Essential information to include in a gift deed

A gift deed must consist of the following essential information:

The deed documentation date and place
Name of the donor
Fathers name of the donor
Donor’s date of birth
Donor’s residential address
Donee’s primary details, such as name, father’s name, date of birth, and the relationship that the donor and donee have.
Details about the gifted property
Signatures of both donor and donee
Relevant information about the witnesses present during the transfer
Signature of the witnesses.

Drafting a gift deed the right way

Do you know the correct way of drafting a gift deed? Here are some tips for you:

First of all, you must be specific about the date and place of the deed

Ensure you include all the required information on a gift deed related to the donor and donee.

You must provide every minute detail of the property for your gift deed.

Two witnesses must be present to bear testimony of the correct execution of the gift deed and their signatures.

Once you draft your deed and everything is complete, you must print the value that the state government determines on stamp paper after making a payment to register the gift deed at the sub-registrar’s or registrar’s office.

Now you might be curious and want to know whether stamp duty rules of gift deeds are the same for any NGO or non-profitable organization.

So for your information, stamp duty is generally not levied. Still, you must check with your nearby registrar’s office, as some states have barred NGOs from accepting gift deeds.

Before anything, cross-check if you have missed any vital clause.

Essential clauses that you must not miss in a gift deed

Next, address some important clauses you must never forget in a gift deed.

1. Your ownership

Anyone cannot have a gift deed unless the owner gifts it. Only an owner has the power to give any property. Therefore if you are on the receiving end, always check whether he initially owns the property; if that is not the case, you cannot be the property owner, even with a registered gift deed.

2. Involvement of money

Adding this clause to your gift deed solidifies the gift deed as a whole. Your gift deed should indicate that there was no exchange of money and that the gift deed presented is done solely for love and affection. Clarifying such a term is necessary that no coercion or money was involved in the transaction of the gift deed.

3. Property Description

Any information related to the property, such as the type of property, structure, area, address, location, or anything relevant, must be mentioned in detail in the format of the gift deed of the property.

4. The relationship status between the donee and the donor

In a property gift deed format, mentioning the relationship between the parties, the donee and the donor, is essential. Some states also hold a provision that provides a concession on stamp duty if the donee and donor are blood relatives.

5. Clause of delivery

A gift deed for real estate should include a delivery clause to ensure precise information about the transfer procedure.

6. Gift revocation clause

The donor can add a revocation clause if they deem fit, or the donor can add a clause to which the donee needs to adhere to avoid revoking the gift deed. However, the donor and the donee must agree jointly before adding this clause.

7. Liabilities clause

The gift deed must also contain any liabilities or rights attached to the gift. For example, the donor must also mention the liabilities, such as what method the donee must use to lease or sell the property or any similar liabilities in the gift deed.

Documents required to complete the property transfer registration process

Listed below are some documents that you must present during the property transfer registration process:

The original gift deed
Some form of Identity proof
Aadhar card
PAN card
Lastly, the sale deed of the property
Any other documents related to the property

What are the various charges of gift deed registration?

The exact charges for all the states may be difficult to ascertain as all states have their stamp duty percentage. However, in this article, we will be sharing with you the four major cities in India and their stamp duty charges:

Delhi has two slabs. For men, it is 6%, and for women, it is 4%
Mumbai has three variants. For family members, the percentage is 3%; for any other relative, its 5% and any agricultural land or residential property, it is Rs 200
Chennai has two variants. For family members, its 1%, and for non-family, its 7%
Kolkata also has three slabs. For families, its 0.5%, non-family falls 6%, and above 40 lakhs, a surcharge of 1% is levied.

Revoking a gift deed

As soon as the property is gifted, legally, the claim on the ownership can be made only by the donee. Revoking such a claim can be challenging. However, as per Section 126 of the Transfer of Property Act 1882, one can have the provision to cancel a gift deed in the below-mentioned situations:

The gift deed is forged during an illegal transaction.
If the deed has any form of coercion during its registration.
If the reasons behind the donation deed are illegitimate, unethical, or objectionable.
If there had been a prior understanding that the deed stands revocable under certain situations.

These cases provide the authority to the legal heir that after the donor’s death, they might file for a revocation of the gift deed.

Everything you must know about Income tax related to a Gift deed

In 1958, Congress repealed the law imposing a tax on gifts. Although it had been around since the early 1900s, it did not reinstate until 2004. Under the new law, if you’ve got a piece of real estate as a gift, you’ll have to pay taxes on it, and this applies only under two scenarios:

The stamp duty value crosses Rs.50000
The property acquired is without any necessary consideration

Here’s an example – Suresh receives an immovable property in the form of a gift deed from Dinesh. The consideration value comes to around Rs 2 lakhs, and the stamp duty value falls between Rs. 5lakhs. The difference between these two amounts exceeds Rs 50 thousand. Hence, Suresh will have to pay tax for that.

Click here to learn more about Property Act.

What are the tax exemptions in case of a gift deed?

The government has provided certain tax exemptions to the people receiving gift deeds. Therefore, if your situation falls under the following scenario, you would not fall under the jurisdiction of tax payment, further ensuring you or any tax getting exempted.

The following mentioned scenarios are as follows:

If the individual receives the gift deed from any relative

If the individual obtains the gift deed as a member of a Hindu Undived Family

If you have received the gift on a special occasion, such as an individual’s marriage

If you have received the deed under the instruction of a will

If you have inherited the deed

If you have accepted the deed as a contemplation of the donor’s death

If a local authority gives the deed

If the gift deed received comes from any form of funds, universities, hospitals, foundations, any other academic institution, any trust, or any medical institution.

If you have received the gift deed from any institution or trust that legally falls under Section 12AA

Verdict

A Gift Deed is a document in which a donor voluntarily transfers a movable or immovable asset to another person. A gift deed must be registered, and a gift deed requires the payment of registration fees.

FAQs

1. Can a minor get a property as a gift?

If a minor receives a property as a gift deed, the minor’s legal guardian must acquire the property on the minor’s behalf. When the minor grows up to be an adult, the individual may choose to accept or return the gift.

2. Can you sell a property you have received as a gift?

You can sell the property if no restrictions are mentioned in your registered gift deed.

3. Will the recipient be responsible for property taxes?

Once you receive the gift deed, you will become the legal owner and must pay all dues and costs, such as energy and maintenance fees, municipal taxes, etc.