What Is the Process for a Gift Deed in Blood Relation?

Gifts and wills are two ways to transfer your property to someone you care about without thinking about it. Discover the step-by-step process for gift deed in blood relation in India.

If you want to give someone the ability to use your property right away, you can do so through a gift. As long as you meet the requirements of the Indian Contract Act, you are free to give away any property you have obtained on your own. Contracts can be entered into by anyone of sound mind who is not a minor and who is not an undischarged insolvent, regardless of age. The property owner can give away immovable property to a family member or a third party. Those who give a gift are known as donors, and those who receive it are called donees. Ensure that the recipient accepts the present; it is also crucial. Both givers and donee must accept the gift during their lifetimes. When a donee takes a gift deed in blood relation, it demonstrates that they have agreed to the present and are receiving it from the donor. At least two observers are required to observe the signing of both parties’ signatures.

Definition of Gift Deed 

According to section 122 of the Transfer of Property Act, a “gift deed” is a voluntary transfer of existing moveable and immovable property made by a donor to a donee without any payment. There are, however, some requirements to a gift: the gift must be physical, and the donor and recipient must both accept and transfer ownership of it.

Gift Deed in Blood Relation

A gift deed in blood relation is a legal document used to transfer ownership of a property from one family member to another without any monetary exchange. It is a popular method for parents to transfer their assets to their children without any tax implications or legal hurdles. In India, the process for creating a gift deed in blood relation can be quite straightforward, as long as certain steps are followed correctly.

Who Are Blood Relatives?

Blood relatives, as defined by India’s Income Tax Act for tax-saving purposes, encompass the following individuals:

1. a) Spouse
2. b) Brother or sister
3. c) Brother or sister of the spouse
4. d) Brother or sister of either of the parents
5. e) Any lineal ascendant or descendant
6. f) Any lineal ascendant or descendant of the spouse
7. g) Spouse of the persons referred to in (b) to (f)

Importance of Cash Gift Deed in Blood Relation

The significance of a cash gift deed in blood relations becomes evident when a substantial sum of money is being given as a gift. This legal document serves as a vital record, formally documenting the act of gifting and creating a legally binding record of the transfer. The use of a gift deed helps ensure clarity and prevents unauthorized use or misunderstandings in the future.

Characteristics of Gift Deed 

The following characteristics include:

1. Absence of Reflection

There must be an emotional connection between the giver and receiver of the gift if the recipient benefits spiritually from it. Gifting something is considered needless under the Indian Contract Act, which outlines this attitude of mind. According to the Supreme Court, any financial incentive from the donor undermines the gift’s character.

2. In the Case of a Donor

3. A Recipient

4. The Actual Present 

5. Act of Transferring

In the context of a gift deed in blood relation, any donation must be accepted while the giver is alive and capable of making a rational decision. The recipient can either express or imply their willingness to receive the gift. It is important to note that if the intended recipient passes away before accepting the gift, the donation cannot be transferred. Additionally, if a recipient is given multiple tangible assets, they have the option to decline any of them. To prove that they have received the gift, the recipient must either take possession of the physical asset or hold the gift deed. Finally, it is within the recipient’s discretion to accept or reject any unwanted or impractical gifts.

Tax Implications of Gift Deeds in Blood Relations

Gifting property to loved ones can be a thoughtful gesture, but there are tax considerations to keep in mind, especially in India. Here’s a breakdown of the key points:

Gifts Between Blood Relatives: Generally Tax-Free

The Good News: gifts to close family (parents, siblings, children, spouse, etc.) are usually exempt from income tax. This applies to gifts made during your lifetime, as well as inheritance and wedding presents.

Gifts from Non-Relatives: Watch the Limit

If you’re receiving a generous gift from someone outside your immediate family, there might be tax implications. Any gift exceeding Rs. 50,000 in a single year is considered taxable income for the recipient.

Remember, Capital Gains Apply

For the person giving the property, capital gains tax might come into play. This tax is levied on the profit made from selling the asset (property). The tax rate depends on how long the property was held – long-term (over 24 months) or short-term (under 24 months).

Spouses Get a Special Deal

Gifting property to your spouse generally doesn’t attract immediate tax. However, any income generated from the property, like rent, will be added to your taxable income.

Keep it Documented and Transparent

A properly registered gift deed is crucial for legal and tax purposes. It serves as proof of the transaction. Even if the gift itself isn’t taxable, reporting it in your income tax return is a good practice for maintaining transparency.

Examples of Gifting Property in Blood Relations

Thinking about gifting property to a loved one? Here are some common scenarios where this might happen:

Planning for the Future: Parents might gift a property to their children as part of their estate planning strategy. This helps distribute assets and potentially minimize future inheritance taxes.

A Helping Hand:  Gifting a property can be a way for parents or grandparents to assist their children or grandchildren with purchasing their first home. This can significantly ease the financial burden of a down payment.

Sharing the Wealth:  An individual might choose to gift a vacation property or a rental property to a sibling or child as a way to share ownership and benefits.

Supporting a Business Venture: Gifting commercial property to a child who is starting a business can be a great way to give them a head start and show your support.

These are just a few examples, and the reasons for gifting property within a family can be as varied as the relationships themselves. Remember, consulting with a legal and financial advisor can help ensure the gifting process is smooth and aligns with your overall goals.

Factors Affecting Stamp Duty on Gift Deed in Blood Relation 

While gifts between blood relatives typically enjoy lower stamp duty rates compared to non-relatives, the exact amount can vary depending on several factors:

Location:  Stamp duty rates are set by individual states in India and can differ significantly.  Generally, urban areas and municipalities will have higher rates compared to rural areas.

Property Type:  The type of property being gifted also plays a role.  Commercial buildings typically incur a higher stamp duty than residential properties, even for blood relatives.  Similarly, newer constructions might attract a higher rate compared to older buildings.

Age Advantage:  Some states offer concessions for senior citizens gifting property to families. This can be a welcome financial relief for older adults.

Women at an Advantage:  In some regions, there might be reduced stamp duty for properties registered in the name of women, promoting gender equality.

What Should Be Mentioned in the Gift Deed in Blood Relation?

Key details to be included in a cash gift deed involving blood relations are:

1. Details of the Donor and Donee

Names, birthdates, places of residence, relationship details, and father’s names of both the donor and the recipient.

2. Amount of Cash Gift

Specify the amount of money being gifted.

3. Purpose of the Gift

If there is a specific purpose for the gift, it should be mentioned in the deed.

4. Voluntary Nature of the Gift

Include a statement affirming that the gift is given willingly and without any force or compulsion.

5. Financial Solvency of the Donor

A statement confirming the donor’s financial solvency.

6. Consideration Statement

Clearly state that the gift is being given without any consideration.

7. Transaction Details

Include information about the time and place of the transaction.

8. Signatures and Witness Information

Signatures of both the giver and the recipient are essential, along with the names and contact details of two witnesses if there are any specific restrictions or conditions.

By covering these aspects in a cash gift deed, the document ensures a comprehensive and legally sound record of the monetary gift, fostering transparency and preventing potential disputes in the future.

Stamp Duty on Gift Deed

The state where the property is located and where the deed of gifts is executed would require stamp duty on the gift deed before its execution. When a present is given to a relative, the stamp duty may be cheaper in some states. The gift deed must be stamped under item 34 of Schedule 1 of the Maharashtra Stamp Act, 1958. The first provision of the clause mentioned above states that the stamp duty due would be 2 percent of the property’s market value since the gift deed is on behalf of your brother. As stamp duty varies from region to region, it is essential to consult with an expert about the stamp duty consequences of your transaction.

Registration of Gift Deed

There must be an official record of the deed to the property. Both parties must complete registration at the same time. It is necessary to pay registration fees. The following documents are required:

• The gift deed
• The purchase agreement with property index II, share certificate, society registration certificate,  apartment deed
• Aadhaar and PAN for both parties
• A copy of the most recent utility bill and proof of payment of the property tax
• Certificate of encumbrances.

The buyer must pay stamp duty as a percentage of the property’s current market value. When giving to a close family, the stamp duty is lower than giving to someone else. If the present is given to a specific relative, the recipient will not be taxed on it.

Revocation and Cancellation of Deed

Due to a gift deed’s termination or a subsequent legal document, contributors are expected to prepare their legal copy. The contributor can keep this paperwork until the beneficiary receives the gifts.

It is possible for the donor and the recipient to mutually agree to suspend or revoke a gift deed and terminate the contract between them. If both parties agree, the gift deed can be canceled, and the transaction can proceed.

Gift VS Will

It would help if you considered making a will to ensure that your assets are transferred to people of your choice only after you die, and you want to enjoy and control those assets while you are still alive; therefore, a will is the best option. A choice ensures a seamless succession of your property after your death and lets your nominees acquire your possessions.

There are other methods of assisting somebody in extreme need besides giving them money, such as a gift. It is only appropriate to use gifting as a means of transferring property when it is necessary. If you give up all or a considerable proportion of your possessions to your legal successors, you may find yourself in a difficult financial situation in old age.

States That Offer a Rebate on Stamp Duty for Property Gifting to Blood Relatives

Several Indian states provide rebates on stamp duty for property gifting to blood relatives:

Maharashtra

A token amount of Rs 200 as stamp duty is applicable for gifting residential or agricultural property to the spouse, children, grandchildren, or the wife of a deceased son, regardless of the property’s value. This rule has been in effect since 2015.

Uttar Pradesh

The Uttar Pradesh cabinet reduced stamp duty and registration charges for property transfers within a family to Rs 7,000, including Rs 6,000 for stamp duty and Rs 1,000 for a processing fee, as of June 2022.

Rajasthan

 If a husband gifts an immovable property to his wife in Rajasthan, no stamp duty is applicable. However, a 2.5% stamp duty is required for property transfers to other blood relatives.

Punjab

Punjab abolished stamp duty on immovable property transfers among blood relatives in 2014. Gift deeds among blood relatives are exempt from the 6% stamp duty required for other registrations.

Haryana

Since 2014, Haryana has granted a complete waiver on stamp duty for gift deeds involving the transfer of property between blood relatives.

These measures are aimed at encouraging legal property registration and minimizing intra-family disputes.

Conclusion

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