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Frequently Asked Questions (FAQs) – Gift of property

What is a Gift?

A gift is a voluntary transfer of property (movable or immovable) from one person to another without consideration. In case of gift, the person transferring the property is known as the donor and the person accepting the gift is known as the donee. The gift to be legally valid must be accepted by or on behalf of the donee during the lifetime of the donor and while the donor is still capable of giving. The essential elements of a valid gift are:

There must be a transfer of ownership
The transfer should be made of an existing property
The transfer should be made without consideration
The donor transfers the property voluntarily with free consent
The gift must be accepted by the donee during the lifetime of the donor

What are the valid modes of making a Gift?

Depending on the nature of the property to be transferred, the law prescribes two modes for effecting a gift. In case of transfer of immovable property by way of gift, registration is necessary irrespective of the value of the property, that means a gift deed is prepared in which the details of the transaction are documented which is signed by the donor and attested by two competent witnesses and duly stamped and registered.

In case of transfer of movable property, it can be transferred by the delivery of possession, which means the gift is complete once the subject matter of the gift is handed over to the donee. A gift deed of movable property is optional. Valuation of the property does not affect the validity of the gift of movable property effected by delivery of possession.

What is the law that governs gifts by one person to another?

Transfer of Property Act, 1882.

What is a Transfer of Property?

Transfer of Property is an act by which a living person conveys property in present or in future to one or more living persons.

What may be transferred?

Property of any kind may be transferred, movable or immovable.

Why should one document a gift deed?

A gift deed is an instrument by way of which property is transferred by way of gift from one person to the other. A gift deed is a preferred mode of transfer so as to avoid any litigation arising out of succession or inheritance claims. A registered gift deed is evidence in itself that the property mentioned therein has been transferred way of gift from the donor to the done.

Important Clauses to be incorporated in a Draft Gift Deed.

A draft gift deed may include the following details:

The date on which the deed is executed
Place at which the deed is registered
Names of the donor and the donee, their address, date of birth and the relationship between the donor and the donee
Signatures of the donor and the donee
Complete details about the property to be transferred as gift
Any rights or liabilities attached to the gift should be mentioned in the gift deed
Clause for consideration must be mentioned in the gift deed. It should be mentioned that there is no exchange of money or any other type of consideration involved. It should be clearly mentioned that the transfer of property is being made out of love and affection.
The gift deed should clearly mention that the transfer is voluntary and the transferor has a very clear intention making the transfer of the property
A clause specifying the rights of Donee must be included
The details of the delivery of possession whether it would be expressed or implied, must also be mentioned
To be cautious, it is advisable to include a revocation clause in the gift deed to avoid any kind of future issues/litigation complications
Two witnesses and their signatures to be affixed in the gift deed
The gift deed must be printed on stamp paper after paying the required amount which would be calculated based on the valuation of the property
Lastly, the deed should be registered at the registrar or sub-registrar’s office.

Which documents are required for gift deed registration?

For the transfer of a property through a gift deed, the following documents are required at the time of registration:

Aadhar Card of the parties
ID Proofs, like PAN, Driver’s License, Passport, etc;
PAN card of both parties
Original gift deed
Sale deed or other original document to prove the title of the donor to the Property
The encumbrance certificate, if any
Any other agreements pertaining to the property
Other documents/materials as may be required as per the requirements of the law of the place of registration

Can gift once made be suspended or revoked?

The donor and donee may agree that on the happening of a specified event, which does not depend upon the will of the donor, a gift shall be suspended or revoked.

Is gifted property taxable?

Usually, the donor is not required to pay any tax, while the receiver is required to put it under Income from other sources. However, gifts received from relatives on the occasion of marriage, by will or inheritance, or from any local authority, fund, or foundation are not taxed

Which is better- a Will or a Gift Deed?

Both things play different roles a will allows a person to have control and ownership over a property till his lifetime, while a gift deed makes a person lose the ownership of the property.

Is stamp duty applicable on gift deeds in blood relations?

Yes. The rate of stamp duty may differ from State to State.

Is capital gains applicable on gifted property?

If the property is further sold, it will be included in either short-term capital gain or long-term capital gain depending upon the period of holding.

Can the donor take the gift property back?

No.

Whether Gift Deed property can be sold?

The property received under Gift Deed can be sold provided, the property is transferred without any condition as to the further sale of the property.

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