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What is Gift?
Transfer of certain existing moveable and immoveable property made voluntarily, without any consideration, by a donor to a donee. This guide will describe in detail information of Gift in India.
WHAT IS A GIFT DEED?
A gift deed contains details of the property, the transferrer and recipient. gift deed allows you to transfer ownership without any exchange of money. Registering a gift deed with the sub-registrar is mandatory as per section 17 of the Registration Act, 1908, and as per section 123 of the Transfer of Property Act.
Who can give Gift Deed?
The owner of an immovable property can gift it to a relative or a third person. A gift is considered valid only if it is made voluntarily and without consideration.
1. Who is a donor?
The person making the gift, or the transferor is called the donor.
2. Who is a donee?
The person receiving a gift, or the transferee is called a donee.
Is registration of a gift deed mandatory?
Registering a gift deed is mandatory as per Section 17 of the Registration Act, 1908 and as per Section 123 of the Transfer of Property Act. A gift deed would be invalid if not registered.
Can you challenge a Gift Deed?
A gift deed can be challenged in court on the basis of its legality subject to the law of limitation and proof of its illegality.
Essential elements of Gift
There are the following five essentials of a valid gift:
1. Transfer of ownership 2. Existing property 3. Transfer without consideration 4. Voluntary transfer with free consent 5. Acceptance of the gift
WHAT CAN BE GIFTED?
- Movable or Immovable Property.
- It must be Transferable.
- Tangible or real property.
- It should be an existing property and not a future property.
Revocation of gifts
Section 126 of the Act provides the legal provisions which must be followed in case of a conditional gift. The donor may make a gift subject to certain conditions of it being suspended or revoked and these conditions must adhere to the provisions of Section 126. This Section lays down two modes of revocation of gifts and a gift may only be revoked on these ground.
- If there is a mutual agreement between the donor and the donee.
2. If the property transfer was not accepted by the donee.
WHAT ARE THE CHARGES?
Stamp duty and registration fee has to be paid to register a gift deed. rules vary across states; certain state governments even offer some concession if the property is being gifted to blood relatives
West Bengal
In West Bengal, the values of the registration fee and the stamp duty differ, based upon who is gifting the property.
1. When the gift deed is made by a family member, the stamp duty is 0.5% of the market value of the property.
2. When gift deed is made by a person other than a family member:
- If the property is situated in the Panchayet Area, then the stamp duty will be 5% of total market value of the property.
- If the property is situated in Municipal Areas, Corporation Areas, then the stamp duty will be 6% of market value of the property.
- If the market value exceeds 40 lakh in both urban and rural areas, then additional stamp duty of 1% will be charged.
This fee can be paid through demand draft, or cash at the office of sub-registrar office of concerned district.
Documents Required for Registration of Gift Deed
Certain documents such as PAN card (Mandatory), Voter Id Card (Mandatory) Aadhar card , driver’s license, passport, etc. need to be submitted to the Registrar’s office in order to get a gift deed registered.
Income tax on gift deed
The value of all the gifts received by a person during a year is fully exempt, as long as the total of such gifts does not exceed Rs 50,000 in a year. If the value of all the gifts taken together exceeds Rs 50,000, then, the aggregate of the gifts received become taxable without any threshold exemption.
Gifts between two close relatives. Consequently, the gift of any asset (whether movable or immovable) made to certain specified relatives, is fully exempt from tax in the hand of the recipient, without any upper limit. The list of close relatives includes parents, spouse, siblings, siblings of the spouse, lineal ascendants and descendants of the person and his/her spouse. The list also includes spouse of the abovementioned persons.
Difference Between Gift and Will
| Parameter of Comparison | Will | Gift |
|---|---|---|
| Type | This type of transfer of property will take effect after the death of the person executing the will. | This type of transfer of property is immediate. |
| Nature | Will is prepared according to the family structure. This provision enables the person to draft the will to either divide the property equally or unequally. | A gift deed is prepared by any person who is mentally stable and has attained the age of 18 years or more. There needs to be a blood relation to draft a gift deed. |
| Registration | Registration of will is not compulsory, but to avoid disputes in the future, registering the will is advisable. | Gifts that involve immovable property need to register under transfer of property act; Stamp duty should be paid based on the value of the property. |
| Significance | The division of the will can be made as per the terms of the testator. The property need not be divided evenly. This process can be altered and hence requires an attested document to avoid ambiguity. | In a gift deed, the asset is transferred directly. A gift comes in action during a lifetime, unlike a will. The person giving the gift is an heir, and the person receiving a gift is the heiress. The drafts of gift deed can be revoked only by the heiress. The heir cannot change the mind once the transaction is done. Drafting a gift deed is better action to avoid disputes. |
| Witnesses – and their role | For a will to be valid, two witnesses’ signature is a must. The date and place should be precise, all the terms need to be transparent and liable. Proving the legator is physiologically stable during the making of the will is essential. | For a gift deed to be valid, it needs to be registered mandatorily to have legal standing in the present or future. There needs to be the presence of at least two witnesses and approval of donee in the form of signature. |
| Tenure – can gift deed and will be challenged? | A will, when want to, is challenged within 12 years from the date of the death of the person. The genuineness of will can be questioned in the court. | A gift deed can be challenged by filing a suit; there are some rules to be followed. This deed can be challenged only if one can establish the act was not as per the wish of the donor. This argument is valid if the transaction is fraud or misinterpreted. |
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