According to a recent ruling by the Supreme Court of India, parents who donate their property to their children in exchange for care must have a maintenance clause added to the gift deed. Otherwise, even if the children don't take care of the parents as they age, the Gift Deed is a permanent solution.
A gift deed is a legal document used to willingly give someone moveable or immovable property. The Gift Deed, unlike a Will, is immediately enforceable without the need for a judicial order. As a result, a Gift Deed is quicker than settling through a will. A gift giver is referred to as a Donor in a gift deed, and the recipient is referred to as a "Donee."
Legal Framework for Gift Deeds in India
In India, gift deeds are governed by the Transfer of Property Act, of 1882, and the Indian Registration Act, of 1908.
The Transfer of Property Act defines a gift as the voluntary and uncompensated transfer of specific existing moveable or immovable property from one person, known as the donor, to another, known as the donee, and accepted by or on behalf of the donee. The gift must be made by a registered instrument signed by the donor and attested by at least two witnesses. The gift deed should contain details of the property being gifted, the identity of the donor and donee, and any conditions attached to the gift.
The Indian Registration Act requires that all gift deeds involving immovable property must be registered with the local sub- registrar's office. The gift deed must be presented for registration within four months from the date of execution. The registration fee is typically calculated as a percentage of the market value of the property being gifted.
In addition to the above-mentioned laws, there may be specific rules and regulations governing gift deeds in different states or regions of India. It is advisable to consult with a lawyer or legal expert to ensure compliance with all applicable laws and regulations.
Important Components of Gift Deed
A gift deed is a legal document that transfers ownership of a property from the donor (person making the gift) to the donee (person receiving the gift) without any consideration. The following are the important components of a gift deed in India:
Details of the Property: The gift deed must contain a detailed description of the property being gifted. This includes the complete address of the property, the total area, and any other relevant details.
Identity of the Parties: The gift deed must clearly state the identity of the donor and the donee. This includes their full name, age, address, and occupation.
Consideration: Since a gift deed is a transfer of ownership without any consideration, it must mention that the transfer is being made as a gift and without any payment.
Rights and Liabilities: The gift deed must state that the donor has full rights to transfer the property and that there are no other claims or encumbrances on the property. It must also mention that the donee will have full ownership rights and liabilities associated with the property after the transfer.
Registration: A gift deed must be registered with the sub registrar's office in the jurisdiction where the property is situated. It must be signed by the donor, the donee, and two witnesses. The registration fee must also be paid.
Stamp Duty: The gift deed must be stamped as per the applicable stamp duty laws. Stamp duty is usually a percentage of the market value of the property being gifted.
Conditions, if any: The gift deed may contain certain conditions, such as restrictions on the use of the property or the right to sell or transfer the property. These conditions must be clearly stated in the gift deed.
It is important to ensure that all the above-mentioned components are included in a gift deed to make it legally valid and binding. It is advisable to consult a lawyer or legal expert while drafting a gift deed to avoid any legal issues in the future.
How to draft a gift deed in India?
Gather the Required Information: The first step in drafting a gift deed is to gather all the required information, such as the complete address of the property, the identity of the donor and the donee, and any conditions attached to the gift.
Prepare a Draft: Based on the information gathered, prepare a draft of the gift deed. The draft should contain all the necessary details and components of a gift deed.
Review the Draft: Review the draft carefully to ensure that all the information is accurate and complete. Also, make sure that the language used is unambiguous.
Consult a Lawyer: It is advisable to consult a Property Lawyer to review the draft and provide their opinion on the legal validity of the gift deed.
Print on Stamp Paper: A gift deed should be printed on stamp paper after the stamp duty charges are paid. The amount of stamp duty and registration fee varies depending on the state in which the property is located. It can be then taken to the sub-registrar’s office for registration.
It is important to ensure that the gift deed is drafted and executed as per the applicable laws and regulations to make it legally valid and binding.
Important clauses to be mentioned in the Gift deed
Some important clauses that should be included in a gift deed are:
- Details of the donor and the donee, including their names, addresses, and identification proof.
- Description of the property being gifted, including its location, size, and boundaries.
- The nature of the ownership of the property being gifted.
- The consideration for the gift, if any.
- Any terms and conditions attached to the gift, if applicable.
- The date and location of execution of the gift deed.
- Signatures of the donor, the donee, and two witnesses.
- Acknowledgment by the sub-registrar that the gift deed has been registered.
- The clause states that the donor has delivered possession of the property to the donee.
- Any other relevant clauses are specific to the property being gifted or the intention of the parties.
Documents required for creating a Gift Deed
The following documents are required for creating a gift deed in India:
Title Deed: The original title deed of the property that is being gifted is required.
ID Proof: The donor and donee must provide their identity proof, such as a PAN card, Aadhaar card, or passport.
Address Proof: The donor and donee must provide their address proof, such as a utility bill, bank statement, or Aadhaar card.
No Objection Certificate: A No Objection Certificate (NOC) from the housing society or the local authority where the property is located may be required.
Stamp Paper: Stamp paper of the appropriate value must be purchased, depending on the state where the gift deed is being executed.
Witnesses: Two witnesses are required to sign the gift deed. They must provide their identity proof and address proof.
Registration Fee: The gift deed must be registered with the sub-registrar's office, and the registration fee must be paid.
Gift Deed Format Sample
This deed of Gift is executed on ________ day of ______________ month _____________ year by Sri./Smt__________________________ , S/o./
W/o._______________________, occupation___________________ , and aged__________ year residence at _____________________________________________________ . hereinafter called the DONOR.
In favour of Sri./Smt. __________________________ S/o./W/o.________________________________________, occupation ____________________, aged years, residing at ____________________________________________________________________________________________________ Herein referred to as the DONEE.
Whereas, the term Donor and Donee unless repugnant to the context shall mean and include their representatives heirs, successors, executors, administrators, trustees, legal representatives, and assigns.
Whereas, the Donor herein is the sole and absolute owner of immovable property bearing No.___________ known as _____________________ situated at _____________________ described in the schedule hereunder written and hereinafter called the schedule property.
Whereas, the Donor is the absolute owner, having acquired the property, by____ ___ and since then Donor has been in possession and enjoyment of the schedule property and paying taxes and levies thereon, as the sole and absolute owner thereof.Whereas the Donee is related to the Donor as___________.
Whereas the Donor desires to grant the said land and premises described in the schedule written hereunder and hereinafter referred to as scheduled property to the Donee as a gift in consideration of natural love and affection subject to the condition hereinafter mentioned.
NOW THIS DEED WITNESSETH that the Donor, without any monitory consideration and in consideration natural love and affection which the Donor bears to the Donee hereby grant and transfer by way of gift, the scheduled property situated at ___________________________together with all the things permanently attached thereto or standing thereon and all the liberties, privileges, easements and advantages appurtenant thereto and all the estates, rights, title, interest, use, inheritance, possession, benefits, claims and demand whatsoever of the Donor TO HAVE AND TO HOLD the same unto the use of the Donee absolutely but subject to the payment of all taxes, rates, assessments, dues, and duties now and hereafter chargeable thereon to the Government or local authorities.
Whereas the Donor hereby covenant with the Donee;
(a) That the Donor now has in himself, an absolute right, full power, and absolute authority to grant the said scheduled property hereby granted as gift in the manner aforesaid.
(b) The Donee may at all times hereinafter peacefully and quietly enter upon, take possession of the scheduled property and enjoy the said scheduled property as he deems fit without any interruption, claim or demand whatsoever from or by the Donor or his heirs, executors, administrators and assigns or any person or persons lawfully claiming or to claim by from under or in trust for the Donor.
(c) AND FURTHER that the Donor and all persons having or lawfully claiming any estate or interest whatsoever to the said scheduled property and premises or any part thereof from under or in trust for the Donor or his heirs, executors, administrators and assigns or any of them shall and will from time to time and at all times hereafter at the request and cost of the Donee do and execute or cause to be done and executed all such further and other acts, deeds, things, conveyances and assurances in law whatsoever for better and more perfectly assuring the said scheduled property and every part thereof unto and to the use of the Donee in the manner aforesaid as by the Donee his heirs, executors, administrators and assigns or counsel in the law shall be reasonably required.
SCHEDULE OF THE PROPERTY
(Gifted under this deed)
All the piece and parcel of immovable property bearing No.____________
On the East On the West : On the South : On the North :
Market value of the property gifted under this deed is Rs. (Rupees___________________________________ only).
The Stamp duty is paid on the market value as computed above.
IN WITNESS WHEREOF the Donor as well as the Donee (by way of acceptance of the said gift) have put their respective hands the day and year first herein above written.
Gift Deed Registration
Document Verification: The sub-registrar will verify the identity and address proof of all parties and ensure that the gift deed has been executed as per the applicable laws and regulations.
Register the Gift Deed: The gift deed must be registered with the local sub-registrar's office in the jurisdiction where the property is located. Once the draft is finalized, the gift deed must be executed in the presence of two witnesses. The donor, the donee, and the witnesses must sign the gift deed.
Obtain the Registered Gift Deed: Once the gift deed is registered, obtain a copy of the registered gift deed from the sub-registrar's office. This copy serves as proof of ownership of the property by the donee.
Stamp Duty and other charges for gift deed registration
The stamp duty and registration charges for gift deed registration in India vary from state to state. Here is a general overview of the stamp duty and registration charges that are applicable in some of the states:
Maharashtra: The stamp duty for gift deed registration is 3% of the market value of the property or the consideration amount, whichever is higher. Additionally, a registration fee of 1% of the market value of the property or the consideration amount, whichever is higher, is applicable.
Karnataka: The stamp duty for gift deed registration is 2% of the market value of the property or the consideration amount, whichever is higher. Additionally, a registration fee of 1% of the market value of the property or the consideration amount, whichever is higher, is applicable.
Tamil Nadu: The stamp duty for gift deed registration is 1% of the market value of the property or the consideration amount, whichever is higher. Additionally, a registration fee of 1% of the market value of the property or the consideration amount, whichever is higher, is applicable.
Delhi: The stamp duty for gift deed registration is 2% of the market value of the property or the consideration amount, whichever is higher. Additionally, a registration fee of 1% of the market value of the property or the consideration amount, whichever is higher, is applicable.
It is advisable to check the current stamp duty and registration charges applicable in the state where the property is located before registering the gift deed. It is also important to note that in addition to the stamp duty and registration charges, there may be additional charges such as legal fees, notary fees, and other miscellaneous charges.
Tax exemption on gift deed
In many countries, including India, there are tax implications associated with gift deeds. In India, gift deeds are subject to tax under the Income Tax Act, of 1961. If you receive a gift worth more than Rs. 50,000 in a financial year, it is considered income and is taxable under the head "income from other sources." However, there are certain exemptions that can be claimed to avoid paying tax on gifts received through a gift deed.
- Gifts from relatives: If the gift is received from a relative as defined under the Income Tax Act, it is exempt from tax. Relatives include parents, spouses, siblings, grandparents, and grandchildren, among others.
- Gifts received on occasions: Gifts received on occasions such as marriage, or under a will or inheritance, or in contemplation of the death of the donor are exempt from tax.
- Gifts received from an employer: Gifts received from an employer are exempt from tax if the value of the gift is less than Rs. 5,000.
It is important to note that if the value of the gift received exceeds the above-mentioned exemptions, the entire value of the gift will be taxable. Therefore, it is advisable to consult a tax expert before accepting any gift through a gift deed to understand the tax implications and how to manage them effectively.FAQs
What are the legal requirements for creating a gift deed in India?
- The legal requirements for creating a gift deed in India are:
- The donor must have the capacity to make a gift.
- The gift must be made voluntarily and without any undue influence or coercion.
- The gift must be accepted by the donee.
- The gift must be of an existing movable or immovable property.
- The gift deed must be executed on a non-judicial stamp paper of appropriate value.
- The gift deed must be signed by the donor and done in the presence of two witnesses.
- The gift deed must be registered with the sub-registrar's office and the registration fee must be paid.
How is a gift deed different from a will?
A gift deed is a transfer of property from one person to another, whereas a will is a legal document that determines how a person's assets will be distributed after their death.
Is it necessary to pay stamp duty on a gift deed?
Yes, stamp duty is required to be paid on a gift deed in India.
Can a gift deed be challenged in court?
Yes, a gift deed can be challenged in court if there are legal issues such as fraud, misrepresentation, or coercion involved in the creation of the gift deed.
Can a gift deed be created for a movable property?
Yes, a gift deed can be created for movable property.
Can a property received as a gift be sold?
Yes, a property received as a gift can be sold by the donee.
Can a gift deed be created between non-family members?
Yes, a gift deed can be created between non-family members.
Can a gift deed be created for a future property?
No, a gift deed can only be created for an existing property.
Can a gift deed be created with a condition?
Yes, a gift deed can be created with a condition, but it must be a lawful condition and not against public policy.
Can a gift deed be created in favor of a minor?
Yes, a gift deed can be created in favor of a minor, but the gift must be accepted on behalf of the minor by their legal guardian.
Can a gift deed be created for a joint property?
Yes, a gift deed can be created for joint property, but all joint owners must be parties to the gift deed and must agree to the transfer of ownership.
Can Gift deed be cancelled in India?
Yes, a gift deed can be canceled in India by filing a petition in the relevant court and stating valid grounds for cancellation. Read Blog for more Information - Cancellation of a Gift Deed in India