Introduction:
A Gift Deed is a legal document used to transfer ownership of immovable or movable property from one person (the donor) to another (the donee) without any monetary consideration. It acts as proof of the transfer of property and ensures that it is legally binding. In India, the Transfer of Property Act 1882 governs gift deeds, specifying the conditions and requirements for their validity.
Understanding Gift Deeds:
A gift deed can be used for both immovable and movable properties. Immovable property refers to anything attached to the land or earth, excluding grass, growing crops, and standing timber. On the other hand, movable properties are those that are not considered immovable.
To understand gift deeds better, let’s break down some key components:
1. Transfer of Property Act: The Transfer of Property Act 1882 covers gift deeds. According to this act, a gift deed must meet certain conditions to be valid:
– The property mentioned in the gift deed must exist at the time of making the gift.
– The donor must be the lawful owner of the property with a clear title.
– The gift must be voluntary and without any coercion.
– The gift must not involve any monetary or other forms of consideration.
– The donee must accept the gifted property.
2. Components of a Gift Deed: A gift deed consists of several clauses and essential details that need to be mentioned accurately:
– Transfer at free will: The deed should explicitly state that the transfer of the gifted property is being done willingly by the donor without any pressure or threat.
– Details of the Donor and Donee: The names, addresses, and relationship between the donor and donee should be mentioned clearly.
– Consideration: The deed should specify that the donor is gifting the property out of love towards the donee and will not take any monetary consideration in exchange.
– Details of the property: The dimensions, plan, and area details of the property should be mentioned to avoid ambiguity in the future.
– Property Rights of the Donee: The gift deed should outline the property rights of the donee, including their ability to sell, lease, or mortgage the property.
– Acceptance by the Donee: The acceptance of the gifted property by the donee must be explicitly mentioned in the deed.
– Witnesses: Two witnesses need to be present during the execution of a gift deed and their names and addresses should be mentioned.
3. Gift Deed Registration: To make a gift deed legally enforceable, it needs to be registered with the Registrar or Sub-registrar’s office. The registration process involves enumerating essential clauses on a stamp paper and paying the requisite stamp duty. The value of stamp duty varies from state to state in India.
Documents Required for Gift Deed Registration:
Now that you have an idea of what is a gift deed of the property, let’s look at what documents are required to Gift Deed Registration:
1. Original Gift Deed: The original gift deed needs to be submitted for registration.
2. ID Proof: Both donor and donee need to provide their ID proofs such as Aadhaar Card, PAN Card, etc.
3. Documents proving ownership: Documents like sale deeds or title deeds that establish the ownership of the property being gifted.
4. Passport size photographs: Photographs of both donor and donee are required.
5. ID proof of witnesses: Witnessing is required during registration; hence, their ID proofs are necessary.
6. Address proof of witnesses: Proof of address for both witnesses also needs to be provided.
Gift Deed vs Will: Understanding the Key Differences
While both gift deeds and wills involve transferring assets from one person to another, there are significant differences between them:
1. Transfer of Ownership:
– Gift Deed: In a gift deed, ownership is transferred immediately upon registration of the deed with the Registrar or Sub-registrar’s office.
– Will: In a will, ownership is transferred after the demise of the testator (person making the will).
2. Revocability:
– Gift Deed: A gift deed can be revoked during the lifetime of the donor under specific circumstances as per the Transfer of Property Act.
– Will: A will can be revised or revoked by the testator at any time before their demise.
3. Legal Validity:
– Gift Deed: A gift deed requires registration to be legally valid and enforceable.
– Will: A will only needs to be in writing and signed by the testator and witnesses to be legally valid.
Tax Implications on Gift Deeds:
The Income Tax Act 1961 governs tax implications on gifts in India. According to Section 56 of this act, if an individual receives a sum of more than Rs 50,000 as a gift from any person (excluding relatives), it is taxable under the head ‘Income from Other Sources’. However, there are exemptions based on different scenarios:
1. Gifts from Relatives: Gifts received from relatives are exempted from taxation. Relatives include parents, siblings, spouse, grandchildren, grandparents, etc.
2. Gifts on Marriage: Gifts received at the time of marriage are exempted from tax.
3. Gifts through Will or Inheritance: Gifts received through a will or by inheritance are also exempted.
4. Gifts from Local Authorities and Charitable Institutions: Certain gifts received from local authorities or registered charitable institutions are exempted.
5. Gifts for Educational or Medical Purposes: Gifts received for educational or medical purposes from specific entities are exempted.
6. Gifts to NGOs: Generally, stamp duty is not levied when gifting property to an NGO.
However, NGOs are required to register the property within four months of the transaction.
It is important to consult a tax advisor or accountant for specific details regarding tax implications on gift deeds.
Conclusion:
A gift deed is a valuable legal instrument for transferring ownership of immovable or movable property without any consideration. By understanding the components, registration process, and tax implications, individuals can make informed decisions about gift deeds. It is crucial to consult legal professionals and follow the legal requirements outlined in the Transfer of Property Act 1882 when preparing and executing a gift deed.
To ensure a smooth transfer of assets, gather all necessary documents, including the original gift deed, ID proofs, property ownership documents, photographs, and witness details. Registering the gift deed with the appropriate authorities adds legal validity to the transfer.
If you have any further questions or require assistance with gift deeds or any other financial matters, it is always advisable to consult reputable professionals or financial institutions like Tata Capital. Tata Capital App can guide you through various financial transactions and provide you with suitable solutions for your needs.
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17 April 2024
6 mins read
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