What is a Gift Deed? Registration and Documents Required in India

Gift Deed Explained: Key Facts You Need to Know

Gifting property or assets is a common practice in India. It is often used to transfer wealth within families or between individuals without monetary exchange. However, gifting property is not as simple as handing over the keys. It requires legal documentation to ensure the transfer is valid and enforceable.

This is where a gift deed comes into play. Understanding what is a gift deed, how to register it, and the documents required for the gift deed is crucial for anyone considering this method of transferring assets.

Understanding the Concept: What is a Gift Deed?

A gift deed is a legal document that records the voluntary transfer of ownership of a property or asset from one person (the donor) to another (the donee) without any exchange of money or consideration.

The transfer is done out of love, affection, charity, or goodwill. This deed is governed by the Transfer of Property Act of 1882, and once executed, it legally binds the donor and donee to the terms specified in the deed.

Types of Gifts Covered

While gift deeds are commonly associated with the transfer of immovable property, such as land or a house, they can also be used for movable assets, including:

• Jewellery
• Shares and securities
• Vehicles
• Artwork
• Cash (above a certain limit)

(Note that for any gift to be legally valid, it must be a tangible asset that can be transferred)

The Importance of Gift Registration

Once the gift deed is drafted, it must be registered with the local sub-registrar's office to be legally valid. Gift registration is essential because it provides legal recognition to the transfer and ensures that the ownership of the property or asset is officially recorded in the donee's name.

Why is Gift Registration Necessary?

• Legal Validity: Without gift registration, the transfer is not legally binding, and the donor remains the owner of the property.
• Protection Against Fraud: Registering the gift ensures that there is a public record of the transfer, protecting the done against any future disputes or fraudulent claims.
• Clear Title: Gift registration ensures that the title of the property is clear and undisputed, which is essential for any future transactions involving the property.

Steps for Gift Registration

• Draft the Gift Deed: The first step is to draft the gift deed clearly outlining the details of the donor, donee, and the property being gifted. The deed should include the relationship between the donor and the donee, the reason for the gift, and a statement confirming that the transfer is being made voluntarily without any consideration.
• Valuation of Property: The property must be valued before registration to determine the stamp duty payable. The sub-registrar's office usually assesses the value based on the circle rate of the property.
• Payment of Stamp Duty: Stamp duty is a tax paid to the government to legalise the gift. The rate of stamp duty varies from state to state and is typically lower for gifts made to close relatives.
• Visit the Sub-Registrar's Office: Both the donor and donee must visit the sub-registrar's office along with two witnesses. The gift deed is then presented for registration.
• Execution of the Deed: The deed is signed by both parties in the presence of the sub-registrar, and the witnesses also sign the document. After verification, the sub-registrar registers the deed, and it becomes a legally binding document.
• Receiving the Registered Deed: After registration, the donee receives the registered deed, confirming the transfer of ownership.

Documents Required for Gift Deed Registration

Specific documents must be presented to the sub-registrar to successfully register a gift deed. The list of documents required for gift deed registration is as follows:

1. Identity Proof of Donor and Donee

• Aadhaar Card
• PAN Card
• Passport
• Driving Licence

2. Address Proof of Donor and Donee

• Utility Bills (Electricity, Water, Gas)
• Voter ID
• Ration Card

3. Property Documents

• Original Sale Deed of the Property
• Khata Certificate/Extract
• Encumbrance Certificate
  • Gift Deed Document
  • Drafted Gift Deed

4. Witness Identity Proof

• Aadhaar Card
• PAN Card

5. Proof of Payment of Stamp Duty

• Challan or Receipt of Stamp Duty Payment
  • No Objection Certificate (NOC)
  • If applicable, from the concerned authorities or society

Ensuring all these documents are in order will help in the smooth registration of the gift deed.

Tax Implications of a Gift Deed

While gifting property or assets is a noble gesture, it is essential to understand the tax implications involved. In India, the Income Tax Act of 1961 governs the tax treatment of gifts.

Gift Tax for Donor and Donee

• Gifts to Relatives: Gifts received from specified relatives, including parents, siblings, spouses, and children, are exempt from tax, regardless of the value of the gift.
• Gifts to Non-Relatives: If the value of the gift exceeds ₹ 50,000 and it is given to a non-relative, the recipient is liable to pay tax on the amount exceeding ₹ 50,000 under the heading "Income from Other Sources."
• Stamp Duty and Registration Charges: The donor is usually responsible for paying the stamp duty and registration charges, although the parties can agree otherwise. These charges are based on the property's market value and vary from state to state.

Capital Gains Tax

If the donee sells the gifted property at a later date, they may be liable to pay capital gains tax. The cost of acquisition for the donee is considered the same as that of the donor, and the holding period includes the period for which the donor held the property.

Revocation of a Gift Deed

A gift deed is generally irrevocable once executed and registered. However, under certain circumstances, it can be revoked if both the donor and the donee agree to the revocation. The grounds for revocation must be clearly stated in the gift deed and should not be against the law.

Conditions for Revocation

• Mutual Consent: Both parties must agree to revoke the gift deed. The revocation must be documented and registered similarly to the original deed.
• Fraud or Coercion: If the gift was made under fraud, coercion, or undue influence, the donor can seek legal recourse to revoke the deed.
• Non-Fulfilment of Conditions: If the gift deed specifies certain conditions that the donee fails to meet, the donor may have grounds to revoke the deed.

Conclusion

By ensuring that the deed is properly drafted, all necessary documents are in place, and the gift is duly registered, you can safeguard the interests of both the donor and the donee, ensuring that the gift is truly a gesture of goodwill and affection without future complications.