A Gift Deed is made to transfer ownership of the movable or immovable property to a family or non-family member without consideration. The Gift Deed format is similar to the sale deed format in a few clauses. The transfer of any immovable property required mandatory registration under the Registration act 1908.
The document is legally binding and is written to transfer property from donor to donee. It is registered with the concerned sub-registrar of the state or district. The tax paid on such properties comes under the heading “income from other sources” and has to be paid. The Gift Deed format must be applied with proper due diligence to make sure the clauses do not have any misinterpretations.
What is a Gift Deed?
A Gift Deed is a legal document that ensures the transfer of property ownership from the donor to the donee. It is made voluntarily, and no coercion should be involved in such transfers. The property is transferred without any consideration or monetary exchange between donor and donee. The registration is done after agreeing on the Gift Deed format.
- It is gifted out of affection, and stamp duty is cleared by the donor for the property involved. The donee can also split the stamp duty charges accordingly with the donor. The rate may vary from one state to another.
The types of property that can be gifted are:
- Movable property
- Immovable property
- Tangible property
- Transferable property
Clauses mentioned in a Gift Deed format
There are some specific clauses in a Gift Deed format that needs to be followed to make it legally binding and valid. They are as follows:
- Details of both the parties: The names, addresses, and necessary details of both donor and donee must be thoroughly mentioned in the Gift Deed format.
- Consideration clause: It must be mentioned in the Gift Deed format that the donor voluntarily transferred ownership out of love, and no compensation or consideration is involved in the transfer.
- Voluntary ownership transfer: The donor should specify that no pressure or threat was made during the transfer of property. The Gift Deed format must contain this clause to make it a legally valid gift.
- Real ownership: The Gift Deed format must mention that the donor is the sole owner of the property and wants to transfer ownership to an individual. Tangible properties are transferable.
- Property details: The Gift Deed format must elaborate that the property involved is existing and solely owned by the donor. The structure, construction period, and locality are also mentioned.
- Donee rights of property ownership: It is mentioned in the Gift Deed format that the donee can sell or lease property after it is transferred to their name. The donor can also prohibit the sale or leasing of the property by putting up such a clause in the Gift Deed format.
- Accepting the transfer: The clause of acceptance must be input in the Gift Deed format where the donee mentions that they are accepting the property and no consideration is paid.
- Witness: The witnesses must be available, and the Gift Deed format should specify the two witnesses involved and their names, addresses, and identity proofs.
- Termination: The Gift Deed format may or may not have any revocation or termination clause, but it is suggested to add one for the Deed of Gift to avoid future complications.
Registration of Gift Deed
After the parties have completed doing the Deed of Gift in a specified Gift Deed format, then they have to register it with the sub-registrar of the state/district.
- The Gift Deed must be signed by both parties and be attested by at least two witnesses.
- To register the Gift Deed in proper Gift Deed format, it must contain every clause as mentioned and implied by law, and the drafting is done on stamp paper.
The stamp duty may vary in every state and can be paid either by the donor or done as they intend.
- The documents necessary for registration are:
- The original copy of the Gift Deed
- ID proof
- PAN, Aadhar card, etc.
- The document which proves the title of a property
- Any other document that may be required or deciphered by the registrar.
There may be other documents that might be needed accordingly after the agreement is made in the Gift Deed format and signed. The format and registration may take a few added steps, and legal consultation is an efficient way to ensure that no complications will take place during the registration.
Tax and stamp duty imposed on Gift Deed
According to the Income tax act 1961, the Gift Deed taxes under section 56 after 1st April 2017.
- If the gift received by the donee exceeds the value of Rs 50,000 without any consideration, then it is taxed under the head “Income from other sources.”
- If the stamp duty exceeds 50,000 INR and no consideration was involved, then it is to be paid by the donee for stamp duty value.
There are certain exemptions on Income Tax in the Gift Deed for properties received on certain occasions. They are as follows:
- If the gift is given by any relative or family member.
- The gift is received at an occasional ceremony or marriage of donee.
- If the property is inherited or acquired through the will.
- The gift was given by any local authority.
- The gift is received from any trust, foundation, educational institution, etc.
The stamp duty charges are diverse for every state:
- Maharashtra= 5%
- Delhi= men 6% women, 4%
- Gujarat= 4.9%
- Tamil Nadu= family 1% non-family 7%
The transfer of ownership must be done through a proper Gift Deed format to avoid legal contingencies and conflicts. It is a legally binding document that must be registered to make it valid.
The property transferred to the donee is done so without consideration. Any type of conflict may arise; it is suggested to take legal consultation beforehand to avoid any misunderstandings.