Giving gifts is a method of showing our affection to someone we care about. We give gifts to people on various occasions such as marriage, anniversaries, birthdays, etc., or even before death. The gifts can be in any form, monetary, property, or any good. In order to transfer a gift, there are specific processes and legal consequences. In this article, we’ll examine Gift Deed, what constitutes the term “gift,” the process to register an official gift deed, the suspension or revocation of gift deeds, and tax regulations of gift deeds throughout the world.
What is a gift deed?
A Gift Deed is a legally binding document that clearly defines the transfer of property between the parties, as well as the type of property that is transferred. Section 122 of the Transfer of Property Act 1882 defines “Gift” as the “transfer of certain existing properties, both immovable and moveable, made voluntarily and without any consideration, by one person known as the ‘donor’ to another person, known as the ‘donee’ and accepted as a gift by or on behalf of the donee. “Donor” means the person who is transferring the gift, and Donee is the person who is the recipient of the gift.
The requirements of a gift deed
A Gift Deed only becomes valid when it meets the following requirements:
- There must be a free transfer of the ownership, i.e., the gift should be freely transferred.
- The property’s ownership must be tied to the existing property.
- There shouldn’t be any consideration for this transfer.
- The person who is transferring the property must be a competent person, and
- The transfer must be accepted by or on behalf of the recipient.
Revocation or suspension of the gift deed
A gift deed could be suspended or cancelled in the following circumstances:
- If the transfer is made upon the fulfillment of certain conditions that are jointly agreed upon by both parties, in this case, the terms must be stated clearly within the gift deed. The gift cannot be transferred if the recipient fails to meet these conditions.
- If the transfer was not made voluntarily, the gift could be revoked by the person who made it.
- The transfer is done for any financial transaction.
- If the recipient doesn’t accept the gift during the lifetime of the donor, in that case, it will be cancelled.
The registration of a gift deed
In accordance with Section 123, gift under transfer of property act must be registered to be considered a valid document. This is why Section 17 of the Registration Act 1908 states that gifts must be registered with the sub-registrar to be legally enforceable and must be signed by at least two witnesses.
How to register a gift deed
Here are the steps to register a gift deed, as per the Registration Act of 1908:
- Evaluation of the property being transferred by an approved valuation expert.
- The gift deed must be executed in the presence of two witnesses by both the donor and the donee.
- The signed document must be submitted to the sub-registrar.
- A lawyer should be engaged to calculate the fees associated with registration, like gift deed stamp duty and other costs.
- Pay the assigned fees.
- Sign the Deed.
What are the required documents?
- An authentic and original copy of the certificate.
- Two passport-size photographs of all witnesses and parties.
- Photo ID document (Voter Id, PAN card, and Passport) of all witnesses and parties.
- The Land Register card.
- The proof of the municipal tax bill.
- Signatures of all the participants and witnesses.
Can a gift deed be cancelled
If the Gift Deed has been registered and accepted by the donee, it cannot be cancelled or revoked without the consent of the donee. The donor is not entitled to any rights of the property. However, the recipient can revoke his or her right over the property and cancel the gift deed.
After discussing the specifics of the Gift Deed and how it is registered, let’s examine the taxation rules of the Gift Deed in different countries.
In India, the Gift Deed can be in the form of the following:
- Cash: When the value of money received as a gift deed by someone exceeds the amount of Rs. 50,000, then the entire amount is taxable.
- Moveable Property: The gift deed for the moveable property may be devoid of consideration or due to inadequate consideration. 1.) If a person receives any moveable property without consideration as a gift and the fair market value exceeds Rs.50,000, then the total aggregate fair market value of the property will be taxable. 2) If a person receives any immovable property as a gift with a value that is less than the aggregate fair market value, but more than Rs. 50,000, then the differential amount (consideration-aggregate fair market value) would be taxable.
- Immovable Property: A gift deed for the immovable property may be made without consideration or with inadequate compensation. a) If a person receives any immovable property without consideration as a gift and the stamp duty on this gift exceeds the amount of Rs. 50000, then the stamp duty value of the property will be taxed. b) When a person receives any immovable property in exchange for consideration as a gift and the stamp duty for the gift is greater than the amount of consideration received, then the differential amount of whichever is greater of the following amounts will be taxable:
- Amount of Rs. 50,000;
- A sum equal to 10 percent of the consideration.
The following conditions are exempt under section 56 (2)(vii) of the Income Tax Act:
Any amount of property or money received from any one of the following is not subject to tax:
- From a relative
Rrelative means –
(i) for individuals would mean:
- A) spouse of the person,
- B) the sister or brother of the individual
- C) the brother or sister of the spouse of the person,
- D) brother or sister of either of the parents of the person,
- E) any lineal ascendant or descendant of the individual,
- F) any lineal ascendant or descendant of the spouse of the person,
- G) spouse of the individual referred to in (b) to (f) and
(ii) in the case of an undivided Hindu family, any member thereof;
- On the occasion of the wedding,
- through a will or by inheritance,
- in anticipation of the death of the payer or donor from any local authority,
- from any foundation, fund, trust or educational institution, hospital, or other medical institution,
- Any other compensation due to or received by anyone as a result of the termination of his employment or change in the terms and conditions related to it.