Gift Settlement Deed in India : Meaning, Types, Cancellation & Format

The Gift Settlement Deed is one of the best ways in which property or assets can be transferred between family members without any monetary consideration. Whether you want to transfer ancestral property to your children or wish to settle assets in your lifetime, it suffices that you know the working of gift and settlement deeds.

In this Write Post, we will tell you everything about Gift Settlement Deeds: their meaning and basis in law, their stepwise registration process, types, and major differences between gift deeds and settlement deeds; what cancellation conditions apply; stamp duty in different states, and even a sample format to show how these deeds are drafted.

When done right, you can ensure that by the end of this blog, you will know the legal and efficient ways to transfer your assets while keeping the interests of all parties protected.

What Is A Gift Settlement Deed?

A Gift Settlement Deed is a legally operative document in which movable or immovable property is transferred from one person (donor) to another (donee) voluntarily, without monetary consideration, usually moved by love, affection, or interest in the welfare of the donee.

It combines features of:

• A Gift Deed, that is, gratuitous transfer of the right of ownership; and
• A Settlement Deed, wherein any intended distribution of property is usually within the family for future peace and security.

Once the deed is registered with the sub-registrar, the transfer usually becomes legal as well as irrevocable after the donee accepts the gift. Depending upon its clauses, a Gift Settlement deed can be either absolute or conditional; it may create rights immediately or impose conditions upon their exercise or ownership.

Legal References:

• A gift, according to section 122 of the Transfer of Property Act, 1882, is considered the transfer of property voluntarily and without consideration now.
• According to the Indian Registration Act of 1908, registration of a gift deed is mandatory for the transfer of any immovable property.
• According to the relevant state laws (for example, in Tamil Nadu), gift-cum-settlement deeds shall be used and structured, chiefly in family matters.

Can A Gift Settlement Deed Be Canceled? 

Normally, since a registered Gift Settlement Deed should have already been accepted by the donee, it is considered irrevocable. However, in certain circumstances, a Gift Settlement Deed may cancel its own or through the law.

Circumstances under which Gift-cum-Settlement deeds can be cancelled:

• Mutual Agreement: If both parties, the donor and the donee, mutually consent, the deed will be revoked by executing a Deed of Revocation and registering it.
• Fraud, Misrepresentation, or Coercion: The donor could approach the court to seek cancellation under undue influence, coercion, or fraud.
• Nonfulfilment of Conditions (if conditional settlement): If conditions agreed upon by the parties do not get fulfilled by the donee, the donor may invoke legal rights to revoke the deed.
• Breach of Trust or Illegal Activity: Misuse of the property gifted may prove another valid ground to cancel it.

(Note: Any cancellation of registered gift deeds shall either be joint or court-backed; unilateral cancellation by the donor shall be incompetent.)

Type Of Gift Settlement Deed

Gift settlement deeds can be classified either unconditionally or conditionally.

Conditional Settlement

In a conditional gift settlement deed, the donor imposes several conditions that the donee must satisfy in order to keep possession of the property. This might include requirements for:

• Maintenance or care of the donor
• The property cannot be used until after the donor's lifetime
• Restrictions on selling or transferring for a specified period
• Any breach of these conditions renders the deed voidable or open to challenge.

Absolute Settlement

An absolute settlement deed constitutes an unconditional transfer of property from the donor to the donee. Here:

• There are no reversing clauses or conditions to fulfill
• Rights are transferred immediately and irrevocably

The most commonly used among family members for an unhindered transfer would be Absolute Settlement.

Key Elements of a Valid Gift Settlement Deed

• A gift settlement deed must satisfy a set of essential requirements to become legally valid and enforceable:
• Voluntary Transfer: The donor should be a willing party to the deed without any force exerted.
• No Consideration: The gift must be made without any monetary or material compensation.
• Donor & Donee Must Be Competent: Both must be of competent legal conditions to enter into a contract (sound mind and legal age).
• Acceptance by Donee: Gift has to be accepted during the lifetime of the donor.
• Proper Description of Property: Clearly mention the details of property including its boundaries, location, survey numbers, etc.
• Attestation by Witnesses: Minimum two witnesses are required to sign the deed.
• Registered with Sub-Registrar: For immovable property, registration is mandatory under the Indian Registration Act, 1908.

Drafting And Registering A Gift Settlement Deed

A well-drafted deed is vital in guaranteeing a seamless transfer of ownership while simultaneously preventing any possible legal disagreements.

Step-Wise Procedure

• Consult a Legal Practitioner in case the transfer is a complex condition or a high-value property.
• Drafting of Deed: Mention full names, addresses, relationship between the donor and donee and description of the property.
• Include Conditions (if any): Clearly mention in case of a conditional settlement.
• Signing of Deed: Must be signed by the donor, donee and two witnesses.
• Visiting the Sub-Registrar Office: The document must be presented for registration in respect of the territory in which the property is located.
• Pay Stamp Duty and Registration Charges
• Submitting Biometrics and Photographs
• Registered Copy Released- After completing said procedure, the registered copy will be released by the sub-registrar which stands as the legal proof of ownership transfer.

Documents Required

• The donor and the donee's Aadhar card
• PAN Card (if the property value is above ₹10 lakh)
• Passport-caliber photographs
• Title documents of property (sale deed, tax receipts)
• Encumbrance Certificate
• Proof of Relationship (although not mandatory, aids in obtaining a concession on stamp duty)
• Identity Proofs of Witnesses

State-Wise Variation In Stamp Duty

Stamp duty and registration charges differ from state to state in India, depending upon the relationship between the donor and the donee..

Difference Between Gift Deed And Settlement Deed

Sample Format Of A Gift Settlement Deed

Conclusion

A Gift Settlement Deed is actually a very wonderful way to transfer property and assets in families. It would also serve as a good factor to avoid future disputes in succession. But the deed must be well understood in terms of the legal requirement, correctness in drafting, and impacts on rights before execution.

Proper consultation of a property lawyer and registration of the deed according to applicable state laws would ensure there are no future complications. Use the gift deed or settlement deed, but wherever or however you plan to execute the legal document, make sure it secures your legacy while protecting your family with interest.

Frequently Asked Questions (FAQs)

Understanding the legalities associated with gift deeds and settlement deeds is the most important part in deciding property transfer. This article holds answers to most common questions that go a long way in clarifying their purposes, enforceability, and legal status in India.

Q1. Gift Deed or Settlement Deed: which is better?

Both documents serve the purpose of transferring property without monetary consideration, but differ in the time of transfer and flexibility.

A Gift Deed is typically intended to transfer the gift immediately and unqualified.

The use of Settlement Deed is opted for wherein transfer can take place in future or conditional (for example, upon lifetime of settlor or subject to fulfillment of obligations).

Q2. What does Settlement Deed mean?

Settlement Deed allocates and/or transfers property rights among the legal heirs or family members to mitigate future disputes, often conditioned. It is meant for:

• Succession planning or inheritance within the family
• Bequeath the estate to heirs as per desires of the settlor
• Reduce litigation over property after death of settlor
• Provide clarity, control, and peace of mind in asset distribution

Q3. What about the Gift Deed verdict of Supreme Court?

The Supreme Court of India has categorically held that once a gift deed is voluntarily executed and registered, it becomes legally binding and cannot be revoked, except in cases of fraud, coercion, or undue influence.

In Thamma Venkata Subbamma vs Thamma Rattamma (1987) case, the Court ruled that even delivery of possession is not a condition precedent in case the deed is properly registered and accepted by the donee.

Thus, it strengthens the fact that registration and acceptance are core requirements that lead to the validity of a gift under section 122 of the Transfer of Property Act, 1882.

Q4. Is it possible to revoke a Gift Settlement Deed?

Yes, but subject to limited conditions:

• If it contains a clause for revocation
• On fraud, misrepresentation, coercion, or undue influence while obtaining it
• If the transfer is conditional and the donee does not fulfill those conditions during transfer
• By mutual consent through a registered cancellation deed
• Or by approaching a civil court for cancellation

Unilateral cancellation of a registered gift settlement deed is not legally valid without judicial intervention.