Unwrapping the Gift Deed : A “Gift Deed” is like a special paper that makes it official when you give someone a valuable gift, like property or assets, for free, without them having to pay you. To make sure this gift is legal and recognized, you need to know how to do the paperwork, the right way to write it, and the fees you might have to pay. It’s a bit like a rule book for gift-giving
What is a gift deed?
A gift deed is like a special paper that says, “I’m giving my stuff or money to someone as a gift.” This stuff can be anything you own, like a house or car. It’s a way to make sure no arguments happen later about who gets what when you’re not around anymore.
The cool thing about a gift deed is that it’s instant. When you give the gift, the other person gets it right away. You don’t have to go to court or wait for a long time. It’s like an express delivery for gifts!
How to draft a Gift Deed?
When you make a gift deed, you need to include a few important things:
- 1.The place and date when you’re giving the gift.
- 2. Info about the person giving the gift (that’s you) and the person getting it. This includes names, addresses, how you’re related, and when you were born. Don’t forget your signatures!
- 3. Everything about the gift itself, like what it is and where it’s located.
- 4. Two people who watch you do the gift and sign to say it’s all real.
After that, you have to get a special paper (called stamp paper) that matches the rules set by the government, and you have to pay some money for it. Then, you need to take the gift deed to a special office (the registrar’s office) to make it official. It’s like putting a fancy stamp on your gift to make sure everyone knows it’s real.
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Components of a Gift Deed
When you’re making a gift deed, it’s important to remember a few things:
- 1. No Money or Pressure: You need to say in the deed that you’re giving the gift because you want to, not because someone is making you do it, and definitely not in exchange for money.
- 2. You Must Be the Owner: Only the person who owns the property can give it as a gift. If you don’t own it, you can’t gift it, even if you hope to own it in the future.
- 3. Describe the Gift: You have to say everything about the property you’re giving, like what it looks like, where it is, and all the details.
- 4. Relationship: If you’re giving the gift to a family member, some places might give you a discount on fees. But even if you’re not related, you should still mention your relationship in the deed.
- 5. Liabilities: If there are rules or things the person getting the gift can or can’t do with it, you need to write those down.
- 6. Delivery: The deed should say clearly that you’ve given the gift and the other person has it now.
- 7. Revoking the Gift: If you want to be able to change your mind about the gift in the future, you and the person getting it should agree on this in the deed.
- 8. Maintenance: If you’re giving the gift in exchange for being taken care of, you should put this in the deed. It’s important because, without it, you might not be able to change your mind later if you’re not taken care of.
These are important things to think about when making a gift, especially when it comes to property. It’s like making a clear set of rules for your special gift to make sure everyone understands how it works.
Disadvantages of a gift deed
When you give a gift through a gift deed, there are some important things to keep in mind:
- It’s Hard to Change Your Mind: Once you give the gift, it’s usually really tough to change your mind and take it back, unless you have a really good reason. Just deciding you want it back isn’t enough.
- You Lose Control: After the gift deed is done, you don’t get to decide what happens with the gift anymore. The person who got the gift gets to make all the decisions about it.
- Potential for Misuse: Sometimes, the person getting the gift can use the system in tricky ways to avoid paying certain taxes or do things you might not like.
So, when you give a gift, make sure you’re absolutely sure about it, because it’s not easy to undo, and you won’t have a say in how it’s used afterward.
Gift Deed format
A “Gift Deed Format” is like a template for making an important paper that says, “I’m giving you a gift.” Here’s what it includes:
- 1. Start: It begins by saying, “This is a gift!”
- 2. People: It tells who’s giving the gift (that’s the donor) and who’s getting it (that’s the donee).
- 3. No Money Clause: It says, “I’m giving this because I care about you, not because I have to or for money.”
- 4. Describe the Gift: It describes what the gift is, like a house, and where it is.
- 5. Relationship Info: If you’re family, it mentions that, which can affect how much you pay in taxes.
- 6. Rules and Limits: If there are rules about what the person getting the gift can or can’t do, those are written down.
- 7. Handing Over: It says that the gift has been given to the other person.
- 8. Changing Your Mind: If you want to be able to take the gift back in certain situations, that’s in there.
- 9. Taking Care Clause: If you’re giving the gift in exchange for someone taking care of you, it makes sure they do that.
- 10.Sign Here: It has spaces for you, the other person, and the witnesses to sign. This makes it official and legal.
Gift Deed registration
According to the Transfer of Property Act of 1882, a Gift Deed is only considered valid when it’s officially registered. Registration involves getting the donor (the person giving the gift), the donee (the person receiving the gift), and two witnesses to sign the deed. This registration step is crucial to make the gift legally binding and recognized by the law. It’s like putting a stamp of approval on the gift.
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Documents required
In addition to the papers we talked about earlier, you’ll also have to show the original gift deed. And, you need to bring your identification proof, PAN card, Aadhaar card, and the property’s sale deed. If there are any other agreements related to the property, you’ll need those documents too. It’s like gathering all the pieces of a puzzle to make sure everything’s in order.
Stamp duty
| State | Stamp duty for gift deed |
| Delhi | Men: 6%Women: 4% |
| Gujarat | 4.9% of the market value |
| Karnataka | Family members: Rs 1,000- 5,000Non-family: 5.6% of the land value |
| Maharashtra | Family members: 3%Other relatives: 5%Agricultural land/ residential property: Rs 200 |
| Punjab | Family members: NILNon-family: 6% |
| Rajasthan | Men: 5%Women: 4% and 3%SC/ST or BPL: 3%Widow: NoneTo wife: 1%Immediate family: 2.5% |
| Tamil Nadu | Family members: 1%Non-family: 7% |
| Uttar Pradesh | Men: 7%Women: 6% |
| West Bengal | Family members: 0.5%Non-family: 6%Above Rs 40 lakh: Surcharge of 1% |
Income tax on gift deed
If you receive a gift through a gift deed, you might have to tell the tax authorities about it when you file your income tax returns. Back in 1998, they got rid of a law called the Gift Tax Act from 1958, but they brought it back in 2004. So, if someone gives you a property as a gift using a gift deed, you might have to pay taxes if the property’s value, according to the stamp duty (a kind of tax on property), is more than Rs 50,000 higher than what you paid for it. For instance, if you paid Rs 1.5 lakhs, but the stamp duty says it’s worth Rs 4 lakhs, and the difference is more than Rs 50,000, you might have to pay some tax. It’s like making sure you pay taxes on the real value of the gift.
Tax exemptions for gift deed
You don’t have to pay taxes on the gift if it’s from:
- 1. Your relatives (if you’re an individual) or from a member of a Hindu Undivided Family (HUF).
- 2. It’s a gift on the occasion of your marriage.
- 3. You got the gift through a will or inheritance.
- 4. The gift is given because the giver is very sick or expects to pass away soon.
- 5. It’s from a local authority.
- 6. It’s from certain organizations like schools, hospitals, or trusts that meet specific criteria.
In these cases, you’re in the clear, and you won’t have to pay extra taxes on the gift. It’s like getting a special exemption.
Gift Deed vs. Will: How They’re Not the Same
| Gift deed | Will |
| Gift deed are functional even during the lifetime of the donor. | Operates only after the death of the testator. |
| Gift deed cannot be revoked/ can be revoked only under specified circumstances. | Can be revoked many times. |
| Property gift deed format is required to be registered under Section 123 of Transfer of Property Act, 1882 and Section 17 of the Registration Act, 1908. | Need not be registered. |
| For registered gift deed, charges include stamp duty and registration charges. | A will is comparatively cheaper. |
| Gift deed falls under the ambit of Income Tax. | Governed by the Law of Succession. |
Can a gift deed be revoked?
Once you give a gift through a gift deed, it’s usually final and can’t be taken back easily. However, there are some situations where it might be allowed:
- 1. If the gift deed was made because someone forced you or tricked you.
- 2. If the reasons behind the gift deed were not okay, like they were morally wrong or illegal.
- 3. If you and the person getting the gift agreed from the start that you could change your mind in certain situations.
In these cases, even if the person who gave the gift (the donor) passes away, their family can still cancel the gift deed. It’s like having an escape plan in certain circumstances.
Can a gift deed be revoked through mutual agreement?
If there’s an extra condition that wasn’t included in the gift deed itself but was a separate agreement between the giver and receiver, and that condition isn’t met, they can both agree to cancel the gift deed.
However, it’s important to know that you can’t just cancel a gift deed on your own. If there’s no fraud or misunderstanding involved, you have to go to court to challenge it. And if you’re trying to cancel it, you need to prove that the giver didn’t agree to it willingly and that there was some dishonesty involved in the process. So, it’s not easy to undo a gift deed; you need a good reason and a court’s decision.
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