Release Deed vs Gift Deed : Understanding Property Transfers under Indian Law

Have you ever wondered what the right way is to transfer your share in a property to a family member? Should you execute a release deed or a gift deed? At first glance, both might look similar as they do not involve a typical sale and often happen within families. But legally, they are very different and come with distinct consequences in terms of rights, taxation, and stamp duty. In this blog, we will break down both instruments in simple terms, compare their features, and explain when each should be used. Stick with us till the end because that’s where you’ll find the clear answer to the question: “Which one is right for me, a release deed or a gift deed?”

You Will Learn:

• Understanding Property Transfer Mechanisms in India.
• The difference between a Release Deed and a Gift Deed in India.
• When to use a Release Deed for co-owned or inherited property.
• When a Gift Deed is appropriate for transferring property to relatives or others.
• Important case laws and precedents guiding their use in India.

Understanding Property Transfer Mechanisms in India

Indian property law offers multiple routes for transferring ownership or rights, such as sale deeds, wills, gifts, leases, and release deeds. The appropriate mechanism depends on the relationship between parties, the nature of ownership, and the intent behind the transfer.

Among these, release deeds and gift deeds are commonly used for non-commercial transfers, especially within families or close relations. However, the legal consequences and tax/stamp duty implications of each differ significantly.

Release Deed

A Release Deed is essentially a legal declaration where one co-owner voluntarily gives up their share in a jointly-owned property. This deed is widely used in family arrangements because it simplifies ownership without involving a sale or commercial transaction. For instance, in the case of inherited property, legal heirs may choose to release their shares in favor of a single heir to consolidate ownership. The process reduces disputes, streamlines property management, and helps avoid complications during future sales or transfers.

One of the notable features of a release deed is that it is not considered a transfer to a third party but rather an enlargement of the rights of the existing co-owner. Since the person executing the deed (the releasor) and the person benefiting (the releasee) are both already co-owners, no consideration (payment) is necessary. However, registration of the release deed under the Registration Act, 1908, is mandatory for immovable property, ensuring that the relinquishment is legally enforceable. Stamp duty is also applicable, though usually lower than what is levied on a sale deed, which makes it a cost-effective option in family property settlements.

It is important to note that a release deed cannot be used to gift property to a stranger. If the intention is to transfer ownership outside the circle of co-owners, then a gift deed or sale deed would be the correct instrument.

Gift Deed

A Gift Deed, unlike a release deed, is broader in scope and can be executed in favour of any person, regardless of whether they are a co-owner. It represents the voluntary and unconditional transfer of ownership from the donor to the donee, without any monetary consideration. The essence of a gift deed lies in love, affection, goodwill, or even charity. For example, parents may execute a gift deed to transfer property to their children, or a person may donate property to a charitable trust.

For validity, the gift must be accepted by the donee during the donor’s lifetime. If the donee refuses or fails to accept, the gift deed becomes void. Moreover, once registered, the transfer is irrevocable, which means the donor cannot later withdraw or cancel the gift unless there are specific grounds like fraud, coercion, or undue influence. This feature makes it a secure and conclusive method of transferring ownership.

The governing law is Section 122 of the Transfer of Property Act, 1882, which provides the definition and conditions of a valid gift. Registration under the Registration Act, 1908, is compulsory when the property’s value exceeds ₹100. In most states, stamp duty on a gift deed depends on the relationship between the donor and donee; gifts to close relatives often attract lower stamp duty than those to unrelated individuals.

Comparison Table: Release Deed vs Gift Deed

Here’s a side-by-side comparison to highlight the distinctions:

Practical Considerations

1. Stamp Duty and Cost Implications
   The cost factor is one of the biggest differences between a release deed and a gift deed. A release deed usually attracts lower stamp duty, particularly when it is executed between family members as part of an internal arrangement or settlement. This makes it a cost-effective instrument for property adjustments within a family. On the other hand, a gift deed is generally charged stamp duty based on the property’s market value, which can be relatively higher. However, several states in India provide rebates or concessional stamp duty rates if the property is gifted to close blood relatives such as children, parents, or siblings.
2. Taxation Aspects
   From an income tax perspective, both instruments enjoy favourable treatment but in different ways. A gift deed benefits the donee since gifts received from specified relatives under the Income Tax Act, 1961, are exempt from taxation. If the gift is from a non-relative, however, and the property value exceeds ₹50,000, it may be taxed as “income from other sources.” In contrast, a release deed is generally not considered a “transfer” under tax laws because it merely enlarges the share of an existing co-owner, rather than transferring ownership to a new party. This makes release deeds largely non-taxable transactions for income tax purposes.
3. Registration Requirements
   Registration plays a crucial role in validating both instruments. Under the Registration Act, 1908, both release deeds and gift deeds must be compulsorily registered with the local sub-registrar’s office if they involve immovable property. Unregistered deeds are not admissible as evidence in court and cannot be enforced legally. Registration not only gives the document authenticity but also ensures transparency and public notice of the change in ownership or rights.
4. Strategic Use of the Release Deed
   A release deed is most effective in scenarios where property ownership is already shared. It is commonly used in family partitions where one member agrees to relinquish their claim, in post-inheritance adjustments where legal heirs decide to vest the property in a single heir, and in settlements among co-owners to prevent disputes. Because it simplifies ownership structure without requiring monetary exchange, it is particularly useful for consolidating titles in family property matters.
5. Strategic Use of Gift Deed
   A gift deed, on the other hand, is strategically employed when the intention is to make a voluntary and unconditional transfer. It is highly preferred for transferring property to children, spouse, or close relatives during the lifetime of the owner to avoid succession issues later. It is also widely used in philanthropic donations, such as gifting land or property to trusts, charitable organisations, or religious institutions. From an estate planning perspective, a gift deed allows property owners to distribute their wealth according to their wishes without waiting for succession laws to apply.
6. Irrevocability and Legal Certainty
   Once executed and registered, both release deeds and gift deeds are irrevocable, which means the party relinquishing or gifting the property cannot later reclaim it. This provides legal certainty to the person receiving the rights. However, in rare cases, if fraud, coercion, or misrepresentation is proven, the deed can be challenged in court. This irrevocable nature ensures stability in ownership and prevents disputes at a later stage.
7. Emotional and Relational Factors
   While often overlooked, the emotional and relational context plays a role in choosing the right instrument. A release deed is usually seen as a gesture of settlement or compromise within families, meant to maintain harmony. A gift deed, in contrast, reflects a gesture of goodwill, affection, or charity, where the donor consciously parts with ownership to benefit the donee or society at large.

Conclusion

In conclusion, while both release deeds and gift deeds are legal mechanisms for transferring rights in property, they serve different purposes and apply in distinct scenarios. The choice between the two depends largely on the ownership structure of the property, the relationship between the parties involved, the underlying purpose of the transfer, and the implications of tax and stamp duty. A release deed is best suited for co-owners looking to consolidate ownership, whereas a gift deed allows broader transfers motivated by love, affection, or charity. To avoid legal complications and ensure proper compliance, it is always prudent to seek the guidance of a qualified property lawyer before executing either document.