Gifting property can be a significant decision, whether it's transferring ownership to a relative, donating to a charitable trust, or making arrangements for the future. However, it is crucial to understand the various factors involved to ensure a smooth and legally sound transaction. In this comprehensive blog, we will explore the intricacies of gifting property, addressing common questions and providing essential guidance.
Gifting a property is a significant decision with legal, financial, and personal implications. Here are key factors to consider:
Sign a Gift Deed
Gifting a property involves signing a gift deed to establish ownership transfer. It should be registered with the local registrar’s office.
Gift Deed Format
The gift deed includes the names of the donor and donee, their relationship, witnesses, signing location, execution date, and property details.
Income and Expenses
The gift deed clarifies that future income and expenses related to the property belong to the donee.
Indemnity and Encumbrances
The gift maker can protect the donee from any liabilities or encumbrances tied to the property.
Property Description and Rights
The gift deed specifies the property’s details and outlines the donor’s rights.
Possession Confirmation
The deed confirms the transfer of property possession to the donee.
Online Option
Some websites offer ready-made gift deed templates. Once prepared, print it on stamp paper, and register the property by paying the required stamp duty.
Consult a legal professional for personalised advice based on your location and situation.
Online Gift Deed
Nowadays, you can create a gift deed online. Websites provide templates for different states. After preparing the deed, print it on stamp paper. Both the gift maker and donee need to visit the registration office to register the property by paying the stamp duty.
Legal Requirements
Legal Process
When gifting a property, legal documents are necessary to ensure a proper transfer.
Age Requirement
The recipient of the property gift must be of legal age to sign the contract. Minors require legal guardians to be involved.
Minor’s Rights
If the recipient is a minor, they can claim or refuse the gifted property once they reach the age of 18.
Registration and Signing
The gift deed needs to be registered and signed in the presence of a magistrate or registrar.
Stamp Duty
Ensure the proper placement of the gift deed stamp and payment of the required stamp duty before registering the property in the recipient’s name
Tax Implications
Be aware of potential gift tax or inheritance tax considerations for both the donor and recipient.
Gift Exemption
Gifts received up to ₹50,000 in a year are fully exempt from income tax. Gifts exceeding this amount are taxable without any exemption. However, gifts between close relatives are fully exempt without any limit.
Close Relatives
Close relatives include parents, spouse, siblings, siblings of the spouse, lineal ascendants and descendants, and spouse of the abovementioned persons.
House Property Gift
If you receive a house property as a gift from a relative, tax implications arise when you sell the property.
Cost of Property
For tax purposes, the cost of the property will be considered as the amount paid by any previous owner.
Short-Term or Long-Term Capital Gains
The holding period, including that of the previous owner, determines whether the profit on the property sale is short-term or long-term.
Short-Term Capital Gains
If the holding period is less than 36 months, the profit is treated as short-term and added to your regular income, taxed at applicable slab rates.
Long-Term Capital Gains
If the holding period is more than 36 months, you can benefit from indexation on the property’s cost. You can also claim exemption from paying 20% long-term capital gains tax by investing in a residential house or capital gains bonds issued by REC or NHAI.
Legal Norms
Familiarise yourself with jurisdiction-specific laws and regulations governing property gifting. Understand legal capacity, age requirements, restrictions on certain property types, and any required documentation or forms.
FAQ:
What are the legal implications of gifting a property?
Gifting a property involves drafting a gift deed, complying with legal requirements, conducting due diligence, and adhering to property transfer laws and regulations.
How does gifting a property affect taxes and financial obligations?
Gifting a property can result in gift tax or inheritance tax for the donor and potential tax obligations for the recipient. Consult a tax advisor to understand specific financial implications.
Are there any restrictions or regulations when gifting a property?
Yes, restrictions exist, such as limitations on gifting certain property types, legal capacity requirements, and specific documentation needed. These vary by jurisdiction.
What are the potential risks and challenges involved in gifting a property?
Potential risks include title complications, disputes over ownership, tax liabilities, and conflicts among parties involved. Legal guidance and due diligence can mitigate these risks.
What are the key factors to consider before gifting a property?
Consider financial implications, the recipient's ability to manage the property's expenses, tax consequences, legal restrictions, and the impact on relationships. Seek professional advice and maintain open communication.
Read more
- What is a Property Sale Deed
- How to Get a Duplicate Sale Deed in Tamilnadu
- The Different Types Of Legal Deeds In India And Their Significance
