Gift Deed allow property owners to willingly handover their assets to anyone and avoid succession or inheritance claims.
A gift deed is a legal document used when someone wants to give money or property to another person. A gift deed can be used to freely transfer ownership of movable or immovable property from the donor to the donee. A gift deed enables the owner of the property to give the property to anyone and eliminates any potential inheritance or succession conflicts in the future. The transfer of property occurs instantly, unlike in the case of a will, and you won’t need to visit a court of law for the execution of the gift deed, saving you time. A registered gift deed is also proof in and of itself.
Property deeds allow the property owner to transfer them before death. This prevents succession or inheritance-related issues. The recipient of the deed must accept it before the property owner’s existence. According to the latest updates on Gift deeds, the senior citizen can take back their gifted property if their children refuse to take care of them!
What Types of Properties Can Be Gifted?
According to Indian law, a property must satisfy the following conditions to be considered a gift:
- The asset or the property must be either moveable or immovable.
- It must be possible to transfer the asset.
- The property shouldn’t be a future property.
- The asset must be accessible.
What Are the Tax Implications of Gifting a Property?
Taxes are levied on the transfer of property using a gift. The gift transaction is tax-free for the donor. The recipient must pay taxes as follows:
- An advantage of more than ₹50,000/- in cash, check or draft is taxed in the previous year if the donee receives it.
- There are no special rules for determining whether a recipient’s income is taxable or not under the 1961 Tax Act.
- Gift income will be included in total revenue and taxed at the applicable tax rate.
- Immovable property stamp duty beyond ₹50,000 is taxable.
The following relatives’ property is tax-free:
- Spouse
- Parents
- A sibling or relative
- A spouse’s brother or sister
- Parent’s sibling
- Grandparents, either maternal or paternal
- Lineal ascendant or descendant
- Spouse’s descendant or ascendant
- Spouse of any individual in c. to h.
- Wedding gifts are tax-free, not just on the wedding day.
- No matter how close the relationship is, a gift of more than ₹2 lakh is liable to taxation.
In What Scenarios Is Executing A Deed More Beneficial Than Executing A Will?
Each of them has its advantages and disadvantages. However, in some situations, a deed is preferred over a will, because:
- As a rule, a facility can be instantly implemented, but only a choice can be performed after the testator’s death.
- Wills must consider relatives’ interests when transferring property to non-relatives, while Gifts do not.
- Gifting a portion of your estate is an excellent way to avoid any potential legal issues or other responsibilities related to the properties you wish to transfer.
How to Register the Deed in India?
The gift deed must be registered to be considered legal under the Transfer of Property Act of 1882. Two witnesses must be authentic to write a deed, which contains the signatures of both donors and recipients, mandatory. It is not enforceable if it is not registered with the Registrar’s office.
Gift deeds need to be stamped, and the stamp duty must be paid to be officially registered as a gift. Each state sets its stamp duty rates. The Registrar’s office will be in the donor’s home state if the donation is moveable.
What Is the Stamp Duty in Each State at the Time Of Executing a Gift Deed?
Stamp duty for the document varies from state to state and year to year. A single person must pay stamp duty under the Indian Stamp Act 1899, which differs by gender and state. Gift Deeds are exempt from state stamp duty. Following are the stamp duty in each state:
- Haryana
- Rural Areas: 3 per cent
- Urban Areas: 5%
- Delhi
- Men: 6%
- Women make up 4% of the population.
- Gujarat
4.9% of market value - Karnataka
- Families: Rs 1,000-5,000
- Non-family: 5.6% of land prices, including registration fee
- Telangana Stamp duty is 5% of the market price
- Market Value-0.5 per cent of the registration fee
- Madhya Pradesh
- Family member-2.5% of property worth
- Non-family members pay 5% of the property’s market value.
- Maharashtra: 3% of the population
- Other family members: 5%
- Agricultural land/residential property: Rs 200
- Punjab
- Family: NIL
- Non-family members: 6 per cent
- Rajasthan
- For Men: 5%
- Women: 3% to 4%
- SC/ST/BPL: 3%
- Wedlock: None
- Wife: 1%
- Family members: 2.5 per cent
- Tamil Nadu
- Family: 1%
- As for non-family members, 7%
11. Uttar Pradesh
- Men’s: 7 %
- Women: 6%
West Bengal
- Family 0.5%
- Non-family members: 6%
- A surcharge of 1% above Rs. 40 lakh
Steps Involved in the Drafting of the Deed
- Format
Like any other legal document, the Deed must adhere to a specific format and standards to be valid. As a result, it is best to get the advice of a professional while writing a gift deed format. The deed must clearly state-
- What is being given, who is giving it, and how they are related, whether by blood or otherwise.
- As a contract between the donor and recipient, it should be free and open to give and receive.
- It should explain that the giver provides the gift of their own free choice and that no money is being exchanged.
- A deed also needs to specify that the giver isn’t bankrupt and is over 18.
- Include the registration date and venue.
- Acceptance
Gift recipients must sign the documents as a condition of receiving the gift, just as significant as the Act of providing it. The Estate and Deed are void if the giver dies before the donee accepts the gift.
- Registration
It is illegal to give a gift to someone without registering it first; according to Section 123 of the Representation of People Act, 1951, its registration is a must. Registration tips include:
- A Deed of Gift
- Registration cost depends on gift value
- The donor must sign the deed
- Two people must witness the Act and sign and date it.
- The donor and the donee must appear at the Registrar’s office.
- The Registrar must receive a copy of the applicant’s valid ID like a passport, driving licence, etc. and PAN card.
- Dues for stamp and transfer taxes must be paid.
Conclusion
These deeds are recognised by law as genuine legal documents for property transfer. The giver can transfer his property to anybody, avoiding controversy. A gift in someone’s favour is voluntary; anyone with legitimate ownership of assets can make a gift. The gift deed’s key selling point is its ease of transfer to a new recipient. Refer VakilSearch for more information and legal inquiries.
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