A Gift Deed is an official legal instrument through which one person (referred to as the donor) conveys property or other valuable assets to another person (the donee) without any consideration. The grant is made voluntarily and for reasons such as love or affection, and mostly in respect to real estate or money. It acts as evidence for the transfer of ownership and the rights of ownership.

In this blog, the essentials of creating, registering, and enforcing a gift deed rules in India. It explains tax rules, legal formalities, and key differences from wills.

What is a Gift Deed?

A gift deed is a formal document which legally transfers property, whether movable or immovable, from a donor to a donee, without consideration. It must mention that the transfer is voluntary and accepted by the donee without undue influence. According to the laws of India, it must be signed, witnessed, and registered in order to be effective.

Why Use a Gift Deed?

Gift deeds provide an open and legal way of transferring property. Here are a few other strong reasons as to why people go for this mode in particular:

• Transfers within a family: Gift deeds mostly apply to transfers between relatives that are intended to be carried out without any monetary consideration.
• No Exchange of Money: The whole process is essentially voluntary, without any reward or compensation being involved.
• Legal Clarity: It provides proof for ownership on documents and assures protection of all the parties, legally.
• Tax Benefits: Transfers in some cases might provide exemption from tax under the Income Tax Act.
• Avoid Future Disputes: Ownership conflicts later on are greatly reduced by a winding of a registered gift deed.

Types of Property that Can Be Transferred Through a Gift Deed

A Gift Deed transfers both movable and immovable properties. Here’s a breakdown of property types that can be transferred: 

1. Immovable Property includes: 

• • Land: This includes all kinds of land, whether agricultural or non-agricultural.

• • Buildings: Includes an owner’s house, apartment, or any other construction which is permanently fixed to the land.

2. Movable Property includes: 

• • Cash: This is transferable currency.

• • Jewelry: Any amount of precious ornament.

• • Vehicles: It includes cars, motorcycles, and other motorised transports.

• • Shares: Stocks, bonds, and such financial instruments.

• • Personal Belongings: Items which can easily be moved and transferred would include paintings, electronics, antiques, and so forth.

Steps to Register a Gift Deed

Conducting the registration of the gift deed is important to ensure that the transfer is valid in law. A Deed Lawyer can assist in preparing the necessary documentation and ensuring that the transfer complies with all legal requirements. Important steps to be considered include the following:

Step 1: Preparation of Documents

Gather all necessary documents, including valid ID proofs, property documents, and the signed Gift Deed. Ensure the documents are complete and ready for submission.

Step 2: Visit to the Sub-Registrar Office

Both the donor and donee must be present at the Sub-Registrar office. Bring the complete set of documents for registration as per the legal requirements.

Step 3: Verification of Documents

The Sub-Registrar will verify the identity of the donor and donee. They will also confirm the details of the property and the documents submitted, ensuring everything complies with legal norms.

Step 4: Payment of Stamp Duty and Registration Fees

Pay the applicable stamp duty and registration fees as per the law. These charges are calculated based on the value of the property being transferred.

Step 5: Final Registration of the Gift Deed

Once all verifications and payments are made, the registrar will register the Gift Deed. This final step legally transfers the ownership of the property from the donor to the donee.

How to Draft a Legally Binding Gift Deed

To draft a legally binding Gift Deed, follow these steps:

• Mention Date and Place: First of all, mention the date and place where the deed will be executed clearly.
• Details of the Parties: Write out the names, addresses, date of births, and signatures of both the donor and donee.
• Offer Description of Property: Give a full detailed description of that property.
• Signature of Two Witnesses: In addition to all these, have two witnesses sign the deed to confirm the transaction’s authenticity.
• Registration of Deed: Now, print the finalised draft on stamp paper and register it with the registrar or sub-registrar.

Gift Tax Exemption and Stamp Duty for Gift Deeds

Understanding about tax and stamp duty implications is necessary when transferring property as a gift, especially from one family member to another. The following explains exemptions and charges related to such cases:

• Gift Tax Exemption for Close Relatives: Gifts to specified immediate relatives (for instance, parents, siblings, children, or spouse) are not subject to tax under the Income Tax Act. This means that no tax would be applicable if such a recipient is also a gift-giver.
• Stamp Duty Rates for Gift Deeds in India: Stamp duty differs based on the concerned state and the relationship. Some states offer a concessionary rate for gifts made to family members, while others follow the usual rate. Registration charges are also applicable.

How to Revoke or Cancel a Gift Deed

To revoke or cancel a gift deed, a formal legal process must be followed. This process can occur through mutual agreement between the donor and donee, ensuring both parties agree to the cancellation of the transfer of ownership. Here’s how it can be done:

Revocation Process of a Gift Deed

The revocation of a gift deed is a legal process and can be done under certain circumstances. This can be fulfilled when both the donor and donee give their mutual consent to cancel the transfer of ownership.

Revoking a Gift Deed by Mutual Agreement

If the donor and donee are in agreement to cancel the gift, the donor may proceed with the revocation by preparing a deed of cancellation. The deed of cancellation should state the mutual consent given by both parties and reason out why the gift deed is revoked. The following measures must be taken:

• Mutual Consent: Both the donor and the donee must express consent to the cancellation of the gift deed.
• Drafting the Revocation Document: The deed of revocation must be drawn up in formal terms, stating the gift deed, parties involved, and mutual consent to the cancellation.
• Execution and Registration: The revocation must be executed by all parties and at least two witnesses and be registered at the same registrar’s office where the original gift deed was registered.
• Legal Effect: Registration of the revocation deed renders the gift deed void, reverting the property to the donor.

Wills vs Gift Deeds: Which Is Better for Estate Planning?

Choosing between a will and a gift deed depends on timing, intent, and legal effect. Here’s how they compare for estate planning:

Aspect	Gift Deed	Will
Transfer Timing	Ownership transfers immediately while the donor is alive.	Takes effect only after the death of the testator.
Legality	Requires stamp duty payment and registration.	Does not require stamp duty; requires probate upon death.
Ownership Control	Ownership is transferred immediately.	The Testator retains control over the gift until death.
Conflict Potential	Less prone to disputes, as ownership is transferred early.	Can be contested after death, potentially causing disputes.
Taxation	Attracts stamp duty; gifts to relatives are tax-exempt.	No transactional costs, but may be delayed due to probate.

Common Mistakes to Avoid When Creating a Gift Deed

Gift deeds must be carefully drafted to avoid legal disputes and invalidation. Here are common pitfalls:

• Not Registering the Deed: 

Duly unregistered gift deeds are not lawfully valid for any immovable property.

• No Acceptance by Donee: 

The Donee has to accept the gift during the lifetime of the donor in order for the deed to be operable.

• False Description of Property: 

If the description given in the deeds is vague or wrong, then the deed cannot be enforced. 

• Not Signing by Witnesses:

The presence of at least two witnesses is necessary for the validity of gift deeds in law.

• Stamp Duty Laws are Totally Ignored:

Incorrect payment of the stamp duty or its total nonpayment will put the deed out of court as invalid according to state law.

Conclusion

A gift deed is a legally recognized way whereby property can be transferred from one person to another without money changing hands. It provides clarity, tax benefits in certain cases, and secures both parties as long as all responsibilities are met. Whether one is transferring a property within family or fulfilling some wishes in the estate, using a properly registered gift deed forestalls disagreements and guarantees lawful transfer of ownership. The parties must obey all legalities, such as registration, stamp duty, and correct drafting.

For secure, compliant, and hassle-free property gifting, Zolvit’s legal experts can help you draft and register your gift deed correctly. Reach out to us if you have legal consultation on property transfer.

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