Transferring your properties to your loved ones is now a lot easier with the introduction of a gift deed. In India, a common way to transfer your property to your relative or loved ones is by executing a gift deed in favor of the recipient. It is important to register the gift deed even though there is no monetary transaction involved in the gifting process. The registration will make the entire process valid. A gift deed is different from a Will. A Will is executed once the property owner has passed on, but a gift deed is executed when the owner is alive and kicking.
WHAT IS A GIFT DEED?
A gift deed is a valid document obtained after registering the transfer of a property to your beneficiary. Under section 122 of the Transfer of Property Act, 1882, you are empowered to transfer any of your Properties to whosoever you deem fit through a gift deed. Similar to a sale deed, a gift deed must convey the details of the properties, the donee, and the donor. Instead of a sale consideration in a sale deed, the gift deed actually transfers the entire ownership to the beneficiary and doesn’t involve any financial transactions.
With regards to section 17 of the Registration Act of 1908, it is mandatory to register a gift deed with the sub-registrar in order for it to be valid. Conversely, section 123 of the same Act renders an unregistered gift deed as invalid.
In addition, holders of a registered gift deed will be entitled to apply for the mutation of the property. The mutation process is a key aspect of the property market which allows the transfer of utility connections in favour of the beneficiary. Also, for a gift deed beneficiary to be able to further transfer the property, he/she must tender a registered gift deed.
WHAT CAN BE GIFTED?
A gift must have the following Properties:
- It must be a properly defined existing immovable and movable property
- It must be transferable
- It shouldn’t be a future property but should exist today
- It should be tangible
ADVANTAGES OF A GIFT DEED OVER A WILL-
The following are the pros of a gift deed over a Will:
- A gift deed is implemented as soon as the donor and the beneficiary agree to the transfer, whereas a Will is only implemented after the death of the property owner.
- A Will is liable to litigation, while there is no need for litigation for a registered gift deed.
- Transfer of properties from the owner to the donee is actually free of taxes.
DISADVANTAGES OF A GIFT DEED OVER A WILL
The following are the disadvantages of a gift deed over a Will:
- A gift deed cannot be revoked after execution, but a Will can be changed as many times as you want, so long as the owner is alive.
- Gift deed comes with an extra cost to cover for Stamp Duty. The duty varies from one state to the other.
STEPS INVOLVED IN THE GIFTING PROCESS-
In India, the gifting process which will result in a gift deed is broadly categorized into three parts for easy understanding. We will now take each of the parts individually. The following are the gift process in India:
- Drafting the Gift Deed: Drafting the gift deed is the first stage in the gifting process. A lawyer comes to the picture here. The lawyer would do the draft using his/her legal experience. The draft would contain what is being transferred and the details of the donee. A gift deed must not be drafted under compulsion of the donor. Also, there mustn’t be any form of financial transaction.
- Acceptable: A donee is required under the law to accept the transferred property during the lifetime of the donor. At any point that the donee refuses to accept the property, then the gift deed will be invalid. The only way to show that the donee has accepted the gift is for the donee to move into the property.
- Registration: With regards to section 123 of the Transfer of Property Act, a gift deed cannot be a valid document unless it is duly registered. During the registration process, about two witnesses are required to attest to the gifting process.
HOW TO REGISTER A GIFT DEED-
In line with the Registration Act of 1908, it is mandatory to register a gift deed. The steps to follow in order to register a gift deed are:
- An approved valuation expert will evaluate the property to be gifted
- The Donor and the Donee will sign the gift deed in the presence of 2 witnesses
- Submit the signed document at the office of the Sub-Registrar nearest to the gifted property
- Engage the services of a lawyer to calculate the registration charges (Stamp duty and other charges)
- Pay the stipulated fee
- Get the Deed attested
Note that stamp duty varies for men and women, as well as from State to State. It is a bit lower for women. For the latest Stamp Duty, you are advised to visit your state government website.
Now, if the donor is a minor, the gift deed cannot be valid because minors are not allowed to enter into a contract, hence, cannot transfer a property gift to another person. However, if the donee is a minor, his/her natural guardian will accept the gift on his/her behalf. The guardian will act as the property manager until a time he/she becomes an adult.
Once the donee is an adult, he/she can decide to accept the gift or return it to the donor.
WHAT ARE THE CHARGES OF REGISTERING A GIFT DEED?
To register a gift deed, you will pay for the registration fee and stamp duty. In India, some State government pegged the cost of registering a gift deed like that of conveyance or sale deed.
However, each state has it own rules which you must comply with. Certain state government even concession if the gifted party is your relative or blood siblings.
Before the registration fee is calculated, a valuer would have evaluated the market value of the gifted property to determine its worth. The registration fee would then be calculated based on the property’s market value. The following are the cost of registering a gift deed in four (4) Indian Cities:
- In New Delhi: Registering a gift deed in New Delhi costs 1% of the property’s market value, plus 100 Rupees for Pasting.
- In Bangalore: It cost 1% of the property’s market value to register a gift deed in Bangalore. However, you will pay a fixed registration fee of 500 Rupees, and another 1,500 Rupees covering filing, scanning, endorsement, record of rights, comparing, and postage fees.
- In Mumbai: In Mumbai, a registration fee of 200 Rupees is payable provided the donee is a family member. For a non-family member donee, the registration fee (whichever is less) is 30,000 Rupees or 1% of the property’s market value.
- In Chennai: The registration fee of a gift deed in Chennai is 1% of the property’s market value.
Please note that some States may request for the registration fees to be paid through Demand Draft, Cheque or cash at hand at the of office of the Sub-Registrar.
GIFT UNDER HINDU LAW-
Under the Hindu law, it is not necessary to do a paperwork when transferring a property gift to a beneficiary. However, a gift is only valid under the law when a donee has taken possession of the gift.
Property Which Can be Gifted-
The following are the properties which can be gifted under the Hindu law:
- Anybody of Hindu origin can dispose of his/her property by the gift which is his/her self-acquired property or separate property
- A Hindu father can also dispose of his property by gift, whether self-acquired or ancestral.
- A female Hindu can also make a gift of her stridhan, subject to, in certain cases, the consent of husband is necessary.
- A widow can gift her inherited property from her late husband
- The owner of the impartible state can also dispose of his/her property by gift unless there is a custom prohibiting him/her to dispose of property by gift.
GIFT UNDER MUSLIM LAW
Under the Muslim Law, a valid gift is known as Hiba. There are three (3) essential items that must be fulfilled for a gift to be declared valid. The items are:
- Declaration: Declaration is the statement made by the donor to signify that he/she truly intends to make a gift. The declaration may either be orally or through writing.
- Acceptance: The declared gift by the donor must be accepted by the donee for the process to be valid.
- The delivery of Possession: Here the donor will put the donee in possession of the gifted property.
THE GIFT TO UNBORN CHILD
Under the Hindu law, any gift gifted to a non-existed person is dull and void. However, the law is no longer the same. It has been amended by the following Acts:
- The Hindu Transfers and Bequest Act, 1914
- Hindu Disposition of Property Act, 1916
- The Hindu Transfer and Bequest Act (City of Madras), 1921
HOW TO CANCEL A GIFT DEED?
A gift deed is a document which shows the details of the gifted properties, donor, and the donee. It is a permanent document that transfers the entire owner’s right to the donor. A gift deed is valid under section 122 of the Transfer of Property Act. The Act requires that once a gift deed has been registered, it cannot be revoked or cancelled by the donor without the approval of the donee. However, the Act empowers the donee to cancel the gift deed and give up his/her interest in the gifted property.
THINGS TO REMEMBER RELATING TO GIFT DEED-
The following are some of the important facts to keep in mind:
- Once a gift deed has been registered, the donor has no right over the property again
- The donor cannot cancel the gift deed without the consent of the donee
- Exception- Section 126 of the Transfer of Property Act makes an exception to the above statement. The section provides that only the death of the donee can give a cancellation right to the property donor.