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The Ins and Outs of Gift Deeds in India: Requirements, Pros, Cons, and Registration Process

Updated: Feb 7

A Gift Deed is a legal document used to transfer ownership of a property from one person to another as a gift. In India, it is an important tool for gifting property or other assets to family members, friends, or others. While gifting property may seem simple, it is important to understand the legal requirements and process involved to ensure the transfer is done correctly.

Requirements for a Valid Gift Deed in India: To be considered valid in India, a Gift Deed must meet certain criteria. Firstly, the gift must be made voluntarily and without any consideration (payment or compensation). The donor must have the right and capacity to transfer the property, and the donee must have the capacity to accept the gift. The gift must also be evidenced by writing and signed by the donor.

Advantages of Registering a Gift Deed:

While Gift Deeds do not require registration, it is highly recommended to register the gift to ensure it is legally binding and enforceable. Registering the gift also provides evidence of ownership transfer and protects against disputes and challenges. To register the Gift Deed, it must be presented to the office of the Sub-Registrar under the Indian Registration Act, 1908.

To better understand the process of gifting property in India, it is helpful to examine a few real-life examples. For instance, if a person wants to transfer ownership of a house to a family member as a gift, they would execute a Gift Deed and have it registered. Similarly, if someone wants to gift shares or securities, they would execute a Gift Deed for those assets and have it registered. In the case of personal property, such as jewelry, a Gift Deed can be executed and, if necessary, registered to transfer ownership. Case References: 1. Prakash Kaur vs. Commissioner of Income Tax: In this case, the Supreme Court of India ruled that a gift of immovable property made by a mother to her son, without adequate consideration, can be treated as income in the hands of the mother under the Income Tax Act.

2. Commissioner of Gift Tax vs. K.R. Muthukaruppan Chettiar: In this case, the Supreme Court held that the transfer of a property under a gift deed must be made without any consideration to be exempt from gift tax under the Gift Tax Act.

3. T. Arivandandam vs. T. V. Satyapal: In this case, the Supreme Court of India ruled that for a gift deed to be valid, there must be an acceptance of the gift by the donee during the lifetime of the donor.

4. D. Anasuya Devi vs. D. Manik Reddy: In this case, the Supreme Court held that a gift deed can be revoked if the donor can prove that it was executed under undue influence or coercion. Connect with our team for Legal Consultation on Gift Deeds:

Essential Documentation for Registering a Gift Deed

To officially register a Gift Deed, it is necessary to visit the Registrar/Sub-registrar's office. In this process, specific documents need to be provided, which include:

  1. The original Gift Deed.

  2. Valid identification proof, such as an Aadhar Card, Driving License, or similar documents.

  3. PAN Cards of both the donor and the donee.

  4. Supporting documentation, like a sale deed or Title Deed, to verify the donor's property ownership.

  5. A passport-sized photograph.

  6. Identification proof for the witnesses.

  7. Address proof for the witnesses.

Tax Implications of Gift Deeds:

In accordance with income tax regulations, the taxation of gifts is subject to specific rules. Here's a breakdown of the key points:

  1. Annual Exemption: Individuals can receive gifts up to Rs 50,000 in a year without incurring any income tax liability. Beyond this threshold, the total value of gifts becomes taxable.

  2. Special Treatment for Close Relatives: Gifts between certain close relatives are fully exempt from taxation without any upper limit. These close relatives include parents, spouse, siblings, siblings of the spouse, lineal ascendants, lineal descendants, and the spouse of the aforementioned relatives.

  3. Taxation of Gifted Property: When receiving a house property as a gift from a relative, tax implications may arise when you decide to sell the property. The property's cost for income tax purposes is determined by the amount paid by any of the previous owners. The profits from the sale are categorized as short-term or long-term based on the cumulative holding period, including that of the previous owner who made the payment.

    • Short-Term Gains: If the total holding period is less than 36 months, the profit from the property's sale is treated as short-term income. It is added to your regular income and taxed at the applicable slab rate.

    • Long-Term Gains: If the holding period exceeds 36 months, you can benefit from indexation on the property's cost. Additionally, you have the option to claim an exemption from paying a 20% long-term capital gains tax. This exemption can be availed by investing in a residential house or in capital gains bonds issued by entities such as the Rural Electrification Corporation (REC) or the National Highway Authority of India (NHAI).

In conclusion, a Gift Deed is a useful tool for gifting property or other assets in India. To ensure a valid and enforceable transfer, it is important to follow the legal requirements and process involved, including registering the gift. Understanding the gift tax rules and regulations, and examining real-life examples, can provide a more complete understanding of the gifting process in India.

Connect with our team for Legal Consultation on Gift Deeds:

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