What is a Gift under Property Law?

Introduction to Gift under Property Law

• A gift under Property law is a legally enforceable written document that the donor can use to freely transfer an existing piece of real estate to the donee, as described in Section 122 of the Transfer of Property Act, 1882. 
• A family member or friend may only offer something to someone else “without any regard” in return. A registered gift under property law is required by Section 17 of the Registration Act of 1908 to transfer immovable property.
  

Gift Tax Implications under Property Law

• After April 1, 2017, gifts under property law are subject to taxation under Section 56(2)(x) of the Income Tax Act of 1961. 
• According to Section 56(2)(x), anybody who receives a gift under property law of more than 50,000 without receiving any other advantages is subject to taxation in the donee’s hands under the title “Income from other sources (a).”
• According to Section 56(2)(x), (b), the stamp duty value of immovable property is taxable in the hands of the donee when it is received as a gift under property law, and the stamp duty value of the deed of Gift exceeds 50,000. 
  
  However, if the resource or cash is acquired from any of the following parties, the gift under property law will not be taxed, and the donee will be exempted from tax:
• If a present came from a family member
• If the individual receives it in connection with their marriage, or
• If it comes via a will, an inheritance, or another
• If it is approved with the idea that the donor won’t live, or
• if it comes from a local government, as described in the Income Tax Act’s Section 10(20).
• If it comes from a university, foundation, or other higher education organization, or if it is a fund or trust that is specified under Section 10(23C) of the Income Tax Act.
• If it comes from a trust or group that is authorized to do business under Section 12A or 12AA.
• If the recipient (donee) receives it through a trust that was created specifically for the recipient’s relative.

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Gift Deed Clauses for Gift under Property Law

The names, residences, and connections of the donor and donee must be specified in the gift deed. The gift under property law should state that the property is being transferred to the donee out of “love and devotion” and that no further payment is being made to facilitate the transfer.

Free Will Transfer

The deed of gift should state that the donor is willingly and freely transferring ownership of the gift property to the donee for the gift under property law. During the transfer, there must be no threats, coercion, or intimidation.

Owner of Real Estate

The deed for the gift under property law should state that it is real, that it is the donor’s exclusive ownership, and that it is being given to the gift receiver.

Property Particulars for Gift under Property Law

The gift deed must provide a complete description of the donated property for a gift under property law.

The Donee’s Rights

The rights of the donee must be outlined in the gift deed. It details the donee’s ownership rights, including the ability to sell, mortgage, or lease the property for a gift under property law.

Donee’s acceptance

The acceptance of the property by the donee should be noted in the gift deed for a gift under property law.

Delivery

The gift deed must expressly or indirectly reflect the purpose of transferring ownership of the gift under property law.

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Benefits and Drawbacks of a Gift Deed

Benefits of a Gift Deed

The advantages of a gift deed for a Gift under Property Law:

• When the recipient and the donor agree to the transfer, the procedure is straightforward, and a gift deed is signed.
• A registered gift deed is not a litigious document.
• Transfers of property through gift deeds are exempt from taxation.

Disadvantages

The disadvantages of a gift are demonstrated in the list below for gifts under property law:

• Once it has been signed and performed, a gift deed cannot be amended. If it is carried out, it is finished.
• In terms of stamp duty, gift deeds cost more. When it comes to gift deeds, states are subject to varied requirements.

What Records Are Necessary to Register a Gift Deed?

The following documents must be used to register a property gift deed for a gift under property law:

• original, signed gift deed
• copies of the donor’s and donee’s identification documents, such as their passports and driver’s licenses
• evidence of the donor’s ownership of the land, such as a sale deed or other documents.
• Additional court rulings or documentation demonstrating the property’s value. Document verification must be done.

Registration of Gift Deeds in India

The following details should be included in a gift deed for a gift under property law:

• Execution of the donation deed: Date and Place
• Details on the donor and/or donee(s) (name, date of birth, address, relationship, etc.)
• Details about the concerned property. Document verification must be done.
• Signatures of the donor, the donee(s), and two witnesses
• Print the deed on stamp paper with the precise value in accordance with state rules.
• Pay the stamp duty on the gift deed at the appropriate state rates online or offline.

Reasons in India for Cancelling a Gift Deed

In India, the Transfer of Property Act, 1882, Section 126 specifies the conditions for canceling a gift deed after gift under property law. Here are some of them:

• Suppose certain circumstances specified in the donation agreement occur or do not occur without the donor’s knowledge or consent. This ground must be mentioned in the recorded deed. The terms of revocation or cancellation must not be unlawful or unpleasant to the property for the gift transaction to be legally enforceable unless they are specifically mentioned in a separate agreement.
• The gift deed may be canceled if the agreement’s assent was obtained unfairly, coercively, improperly, or by misinterpretation.
  

Conclusion 

There are various essentials of Gift Deeds for gifts under property law. One must take legal advice from an expert lawyer to get the Gift Deed drafted. Registration of Gift Deeds is also essential to get it enforced in the Court of Law. Taking legal advice not only saves time but also makes sure that the work is done in a more efficient way.

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Frequently Asked Questions

Q1. What is a Gift under Property Law?

Ans1: A gift under Property Law refers to the voluntary and lawful transfer of immovable property from a donor to a donee without consideration, as defined under Section 122 of the Transfer of Property Act, 1882. It must be registered as per Section 17 of the Registration Act, 1908.

Q2. Are gifts under property law taxable in India?

Ans2: Yes, as per Section 56(2)(x) of the Income Tax Act, 1961, gifts exceeding ₹50,000 are taxable in the hands of the donee under “Income from other sources,” unless received from specified relatives or under exempted conditions such as marriage or inheritance.

Q3. When is a gift under property law exempt from tax?

Ans3: Gifts are tax-exempt if:

• Received from relatives
• Received on the occasion of marriage
• Received through inheritance or will
• Received from local authorities or registered charitable trusts
• Received from certain institutions under Section 10(23C) or Sections 12A/12AA

Q4. What are the key clauses in a Gift Deed?

Ans4: Key clauses include:

• Details of donor and donee
• Declaration of free will and ownership
• Complete property description
• Donee’s rights and acceptance
• Clause stating delivery and transfer of ownership

Q5. What are the benefits of a gift deed?

Ans5: Benefits include:

• Quick and simple transfer with mutual consent
• Not prone to litigation if registered properly
• Exempt from tax under certain conditions

Q6. What are the drawbacks of a gift deed?

Ans6: Drawbacks include:

• Irrevocable once executed
• Higher stamp duty depending on the state

Q7. What documents are required to register a gift deed?

Ans7: Required documents:

• Original signed gift deed
• ID proof of donor and donee
• Proof of ownership (sale deed or title documents)
• Documents verifying property value

Q8. How is a gift deed registered in India?

Ans8: Steps for registration:

• Print the deed on stamp paper with correct value
• Include complete details of parties and property
• Signatures of donor, donee, and two witnesses
• Pay applicable stamp duty and registration fee
• Register with the local sub-registrar

Q9. Can a gift deed be cancelled?

Ans9: Yes, under Section 126 of the Transfer of Property Act, 1882, a gift deed can be cancelled if:

• Conditions for revocation were pre-agreed in the deed
• The deed was obtained through fraud, coercion, or misrepresentation

Q10. Is legal advice necessary before drafting a gift deed?

Ans10: Yes, consulting a legal expert ensures the deed is drafted correctly, registered properly, and all tax and legal obligations are met efficiently and effectively.