Gift Deed is a legal document that can be used to transfer movable or immovable property to family, relatives, friends or others voluntarily. The document is considered valid when the transfer does not seek money or any other value in exchange.
The description of ‘gift’ as per Section 122 of the Transfer of Property Act, 1882 states a transfer of any existing movable or immovable property made voluntarily and without any consideration by a donor to the donee. The act also stipulates that the document should be registered as per the Indian Registration Act, 1908.
Types of Transferring a Property
As per Section 5 of Transfer of Property Act, 1882 a living person that includes an individual, company, association or a body of individuals can transfer property to other living persons, to himself or himself and others. The transfer of ownership can act immediately or in the future. The following are the ways for transferring a property:
Key Factors of a Valid Gift Deed
The following are the key factors for a valid gift deed
- The donor must gift without any consideration
- The donor and the donee must be alive when registering the deed
- The donor should be above 18 years
- Any properties mentioned in the gift deed shall exist and transferable
- The property should be registered
- The gift deed should be signed by both the donor and donee with witnesses
- The gift deed should have been drafted as per the Indian Registration Act, 1908
Components to be included in the Gift Deed
- Relationship between the donor and donee
- Rights, power and executing authority by the donor
- Details of the transfer properties with a registered name and address of the property
- Details of the donee such as name, address and age
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Role of a Minor
As per Transfer of Property Act, 1882 a minor cannot draft a gift deed. However, a minor can receive the gift, but the minor can take over the property only after completing 18 years of age.
Registration of the Gift Deed
The gift deed should be registered as per Section 17 Registration Act, 1908 and Section 123 of the Transfer of Property Act. The gift deed shall be made on a stamp paper and to be registered at a sub-register office. The charges of the stamp paper depend on the charges stipulated by the state government. The gift deed shall be registered with the signature from the donor, donee and two witnesses. The registrar will attest the gift deed.
Taxation on Gifts
Property transferred by gift deeds is not taxable as per Section 56(2)(vii) of the Income Tax Act, 1961 if received by an individual, Hindu Undivided Family (HUF), from any relatives, marriage or at the time of death. If the donee does not qualify under the following or if the gift exceeds more than Rs.50,000, the gift shall be liable for taxation.
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Types of Property
- Land and Goods
- Mines, Roads and Canals
- Cash, Jewels and Ornaments
- Vehicles, Computers and Paintings
- Machinery, Equipment and Materials
Revoking a Gift Deed
As per Section 126 of the Transfer of Property Act, a registered gift deed can be revoked. Hence adding a clause for revoking might provide suitable options. However, if the deed meets the following criteria, revoking might be considered
- Registered unlawfully
- If the deed is not registered
- Registered to a minor
- Provided non-existing properties
- In case of transfer of funds or equivalent value for the gift deed
- Donee passes away before acquiring the property
- Gift deed does not meet the criteria of the Transfer of Property Act
Charges for registering and cancelling the gift deed is applicable. The rates for registering and cancelling the gift deed varies in each state.