What is a Gift Deed?
The Transfer of Property Act of 1882 defines Gift in Section 122. “Gift” refers to the transfer of certain existing movable or immovable property to another person, (donee) by a person called the donor voluntarily without consideration. Such a Transfer of property needs to be accepted by or on behalf of the donee. This acceptance must take place during the donor’s lifetime and while he is still capable to give. If the recipient dies before acceptance, the gift is void.
Naramadaben Maganlal Thakker v. Pranivandas [1997 2 SCC 255]
The Supreme Court adjudged that the gift of movable or immovable property is voluntarily transferred without consideration. The person who gifts the movable/immovable property is the donor and the recipient is the donee.
The essential elements of a gift are:
- The Absence of consideration.
- The Donor.
- The Donee.
- Existing property
- Transfer with free consent
- The Transfer of ownership
Things that can be given as a gift should have the following characteristics:
- The property can be either movable or immovable.
- It should be tangible property.
- It must be transferable.
- It should be in the present, not a future property.
The procedure of Gifting
- Drafting: The gift deed is drafted with the help of a lawyer. It states what is being transferred and to whom. Since gift deed is a contract between the donor and the donee, which defines the simultaneous and reciprocal act of giving and taking; therefore, the deed should mention that it is a voluntary action and out of the donor’s own choice without any force or coercion, without any exchange of money. The contract should also state that the donor is solvent (not bankrupt).
- Acceptance: The gift must be accepted after the gift is executed. This is a legal requirement. It is recorded by the donee’s signature in the deed and is further substantiated by acceptance of possession of the gift. In case the recipient does not accept the gift, the gift will be considered invalid. Also, the acceptance of gift should take place throughout the life of the donor. Otherwise, the gift may be rendered invalid.
- Registration: Gift of immovable property needs to be registered under the Transfer of Property Act. According to Section 123, ownership of gift of the immovable property could not be transferred to the donee unless it is registered. In the case of immovable property, the ownership or the title will not be transferred to the donee unless the registration of the gift deed is completed. Stamp duty should be paid based on the value of the gift. In order to determine the fair value of the real property to calculate the stamp duty, the property is being valued by an approved valuation expert. Two witnesses are required for Attestation during registration and post-registration so that the title transfer is possible.
In case the gift is of immovable thing or of a property, though there isn’t any monetary transaction involved, it must be registered in the name of the donee by paying stamp duty, with the sub-registrar in accordance with Section 17 of the Registration Act, 1908, and Section 123 of the Transfer of Property Act.
To transfer the utility connection in the name of the donee, one must apply for a mutation certificate after successfully registering the gift deed.
Stamp Duty on Gift Deed of the Property
The applicable fee for registering a gift deed varies from state to state. However, in most states, the stamp duty for transferring property by gift is the same as the sale deed. If property transfer occurs between blood relatives, some states also have certain concessions. Let’s have a look at the Gift Deed Registration Charges In various states:
- In Delhi, the registration charges are 4% for men and 6% for women.
- For gifting the residential or agricultural land to one’s spouse, children, grandchildren or wife of a son who has died, the Stamp duty is of Rs. 200 and Rs. 200 Registration charges.
- In West Bengal, the charges in case the gift is transferred to a non-family member then 5% of the property’s market value in panchayat areas, and 6% of market value in municipal areas; whereas in case the gift is transferred to a family member then 0.5% of the market value of the property.
- 2% of the market value of the property is charged for the registration of Gift Deeds in Uttar Pradesh.
- In Karnataka, the charges For the transfer of a gift to a non-family member is 5% on the market value of the property + surcharge + cess and 1% registration fee; whereas For the transfer of a gift to a family member, the charges are Rs.1000 + surcharge + cess and fixed registration fee of Rs.500.
- Stamp Duty in Andhra Pradesh is 2% of the market value of the property and the Registration Charges are 0.5% of the market value of the property.
- In Tamilnadu, Stamp Duty is 7% of the market value of the property, and Registration Fee is 1% of the market value of the property.
- In Madhya Pradesh, the charges in case a gift is transferred to a non-family member is 5% of the market value of the property; whereas in case, the gift transferred to a family member the charges are 2.5% of the market value of the property.
- Rajasthan charges 6% of the market value of the property as the Stamp Duty and 1% of the market value of the property as Registration Fee.
- In Telangana, stamp duty is 5% of the market value of the property and additionally Registration Fee is 0.5% of the market value of the property.
- In Maharashtra, the stamp duty on gift deed of the total value of the property is 3% for a family member and 5% for other people. If the gifted property is agricultural land or residential property and is gifted to any family member without any consideration then, for such property the stamp duty is 200 Rs.
Can a gift be revoked?
After the gift deed to the recipient is executed, the donor has no right to revoke the deed of the gift until there is no special clause mentioning the cancellation of the gift. Section 126 of the Act stipulates the legal provisions that must be followed when conditional gifts are given. The giver can make a gift under certain conditions that are suspended or revoked, and these conditions must comply with Section 126. This section specifies two ways to revoke gifts, and gifts can only be revoked based on these grounds:
- Revocation by mutual agreement
- Revocation by the rescission of the contract
In the case of Bhagatrai v. Ghanshyamdas [AIR 1948 Nag 326] the Privy Council has stipulated that after giving the gift deed and before registering, Donors cannot withdraw gifts. The court ruled: the gift is valid if a properly certified registration of document is done and the gift title has been transferred to the recipient in accordance with the law, and then it shall not be defeated by the donor’s intention.
Tax exemptions on Gift Deed
According to Indian income tax law, the value of gifts received by the recipient in a fiscal year is completely tax-free, as long as the total value of the gift does not exceed Rs. 50,000/- If the valuation exceeds 50,000/-, it will be taxed without any threshold exemption.
In case the gift of movable or immovable property is between two close relatives, it should be completely tax-free without any upper limit. The list of close relatives is also specified, including parents, siblings, spouses, siblings of spouses, lineal descendants, and descendants of anyone and their spouses. The spouses of the individual should also be included.
Minor Donor or Donee
An owner of the property can make a gift to anyone except when the donor or donee is a minor. Since Minors are not eligible for contracts; therefore, they cannot transfer property as a gift. If the donor is a minor, the gift contract is legally invalid. Whereas if the donee is a minor, then the natural guardian can accept gifts on his/her behalf. The guardian acts as the manager of the donated property. The obligation cannot be enforced on donee until he/she is a minor if the gift is onerous. When the recipient reaches adulthood, he can either bear the burden or return the gift.
A conditional gift means that if a certain condition that must be met is not met, the gift deed will become invalid. Conditions must be set before or when the gift is given; it cannot be added later. The conditions must be uncertain or something beyond the control of the donor. However, conditional gifts for which the donor has complete control over the conditions are invalid. In addition, conditions cannot be unethical or illegal.
The two kinds of conditions attached to the gift are precedent and subsequent condition. According to Section 122 of the Transfer of Property Act says Conditions precedent are conditions that are expected to occur or must occur before the beneficiary receives the gift. If the precondition itself is invalid, then the gift fails completely. Subsequent conditions are conditions that must be met after the gift is transferred. If it is not met, the beneficiary loses the gift and the gift is retrieved by the donor. If the subsequent condition is deemed invalid, then the gift becomes an unconditional gift.
Sarojini Amma v. Velayudhan Pillai Sreekumar [Civil Appeal No. 10785 of 2018 (Arising out of SLP (C) No. 35515 of 2017) decided on 26.10.2018]
The Supreme Court ruled that conditional gifts can only be fulfilled when the conditions stipulated in the deed are complied with and until these conditions are still not fulfilled; the donor has the right to cancel such gifts.
Reninkuntla Rajamma v. Sarwanamma [2014 9 SCC 445]
The court held that the donor has all the rights of property owners throughout his life, and this right does not affect the validity of the gift deed. In addition, the court said that meeting the conditions mentioned in the contract has the greatest significance and that these conditions will not invalidate the gift. IT was also mentioned that Indian law does not provide for the transfer of ownership without transferring the right of possession for the same. However, Section 122 of Transfer of Property Act defines condition precedent, which should be met before the deed of gift is executed, and the gift constitutes an unconditional transfer of property.
Difference between Gift deed and Will
- A gift Deed is effective during the lifetime of the donor whereas, a Will is effective only after the death of the person making it (i.e., testator).
- Gift Deed has to be registered under Section 17 of the Registration Act, 1908 and Section 123 of the Transfer of Property Act, 1882 whereas, a Gift Deed need not be registered.
- To register Gift Deed one has to pay registration charges and stamp duty, whereas, a Will has only nominal registration charges if required.
- Gift Deed is covered under Income Tax Act, whereas, a Will is covered under Law of Succession.
- Gift Deed can be revoked only under certain circumstances, on the contrary, a Will can be revoked several times by the testator during his lifetime.
Transfer of Property Act broadly defines the gift itself and the circumstances under which such gifts are transferred. In order to constitute a transfer as a gift, one must comply with the provisions of the act. A gift is a transfer of ownership, must be owned and in possession by the transferee, and must exist at the time of the transfer. The gift of future property is invalid.
The donor must have the competence to carry out this transfer, but the donee or recipient can be anyone. If the donee does not have the competence to contract, a qualified person must ratify the acceptance of the gift on his behalf. Gifts can only be revoked through an agreement mutually reached between the donor and the recipient or through the rescinding of the contract related to the gift.