Gift Deed

A gift deed is a legal document that transfers a gift from one person to another as per the provisions of the law. According to Section 122 of the Transfer of Property Act, 1822, a "gift deed" is a "legally binding written document by which a donor may willingly transfer any existing moveable or immovable property."

A gift deed is valid only when it is given out of love and affection, by one family member/friend to another without any consideration in return. As per Section 17 of the Registration Act, of 1908, it is compulsory to have a registered gift deed when anyone wants to transfer immovable property.

Important Clauses in Gift Deed

Being a very important legal document, you need to mention a few things in the gift deed. Some of them are

• Consideration Clause

The gift deed should clearly state that the transfer is being made out of love and affection and does not involve the exchange of money or any other form of consideration. It is irrelevant how small the consideration is, it will not be considered a gift.

• Possession of Property

You must have the property you wish to gift i.e. you must be the title holder of the immovable property. While giving a gift, the property must exist; you cannot gift something that you may receive in the future.

• Free Will

The transfer must be free from any form of coercion, undue influence, threat, or fear. The gift must clearly state that the transfer is voluntary and that the transferor has a clear intention to do so.

• Information about the Property

The property must be described in detail. It includes structure, address, color, area; location, etc. should be clearly stated.

• About Donor and Done

The relationship between Donor and Donee is important whether they are blood relatives or not. Some state

• Rights and Obligations

Under this clause, any additional rights or obligations attached to the gift shall be specified. For example, any rights relating to the further sale, or further leasing.

• Donation Rights

An express mention of donation rights forms an integral part of the gift deed. It includes absolute rights to enjoy the property peacefully, to make changes to the property, and to receive rent or any profit that may arise from the property.

• Delivery

The delivery clause speaks of an act (express or implied) that will confirm possession of the property

• Revocation Clause

Although not mandatory, it is advised. This will help prevent future complications. It has to be expressly stated, not implied. And both donor and donee must agree to this clause.

Description of Donor/Donee

A donee is a person who transfers immovable property. Any person who is of sound mind and capable of contracting can be a donor. A minor cannot be a donor because he/she is not capable of entering into a contract.

Donee is a person who accepts a gift/transfer made to him. A minor can be the donee, however, the donee's guardian must accept the gift on behalf of the donee. In the case of a hardship gift (a gift attached with certain conditions), the minor may accept or return the gift after reaching adulthood.

Steps Involved in Drafting Gift Deed

A gift deed should include the following;

Step 1: Draft the contract with the following essentials.

• Date and place where the deed is to be executed
• Information of donor and donee such as name, residential address, the relationship between them, date of birth, etc.
• Details about the property
• Two witnesses
• Signatures of Donor and Donee with witnesses

Step 2 : Print on stamp paper of appropriate value as per your state

Step 3 : Register the deed at your registrar or sub-registrar office.

Documents Required for Gift Deed Registrations

After ensuring that your gift deed is signed and attested by witnesses and that you have paid the stamp duty and registration fee as per your state regulations. You will need to carry some other documents

• Original Gift Deed
• ID proofs
• PAN card
• Aadhaar Card
• A document such as a sale deed to prove the donor's title to the property
• Other agreements you may have entered into concerning the property

The list is not exhaustive; you may need other documents like certificates related to the value of your property depending on your state.

Types of Properties that can be Gifted

The following properties can be gifted;

• Movable or Immovable property
• Existing assets
• Transferable property
• A tangible asset

Some advantages can be attributed to gift deeds. Since gifts are made during the donor's lifetime, you can transfer your property as a gift if you want a specific person to take care of your property or perhaps you want to help someone. Also, if there is a good chance of legal implications surrounding the property, some people do a gift deed and avoid such lawsuits.

Can a Gift Deed be revoked/canceled?

A gift once given and registered cannot be revoked with due process of law. After acceptance, it becomes the property of the donor. The donor cannot independently cancel the deed. Also, a deed in which the parties have agreed that the deed shall be revocable in whole or in part only at the will of the donor is not a valid gift deed.

However, there are certain grounds under Section 126 of the Transfer of Property Act, of 1882 when gifts can be revoked. Revocation itself involves canceling the gift deed and returning possession of the property to the donor. The reasons are–

• If there is an agreement between the donor and the donee, the gift shall be revoked if certain specified events occur or do not occur. The point to be noted here is that the donor should not have control over the occurrence of such events. And both parties must have agreed to such a condition in respect of the gift deed.
• The conditions prescribed should not be immoral, illegal, or offensive to property.

A gift may be canceled if consent has been obtained for the above reasons and if the donor dies, his heirs have the right to file for cancellation of the deed.

Tax Consequences of Gifting Property

Under Section 56(2)(x) of the Income-tax Act, 1961, where any amount received by any person after 1st April 2017, irrespective of the aggregate value thereof, exceeds fifty thousand rupees, the aggregate value of this amount shall be income from other sources. shall be taxable under this head. The said clause shall not apply to the following persons mentioned below;

• From any relative; Or
• On the occasion of the person's marriage; Or
• By will or inheritance; Or
• In contemplation of the death of the donor or donee, as the case may be; Or
• From any local authority
• From any fund or foundation or university or institution referred to in clause (23C) of section 10; Or
• By or through any trust or body registered under section 12A or section 12AA; Or
• Clause by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (through) of clause (23C) of 10; Or
• Is not deemed to be a transfer under clause (i) or 20 clauses (iv) or clause (v) or clause (vi) or clause (via) or clause (via) or clause (vib) or clause (vic) or section (vica) or section (vicb) or section (vid) or clause (vii) of section 47; Or
• By a trust created or established by a person solely for the benefit of a relative of the person.