Gift deed takes immediate effect, reducing scope for any dispute
The flip side is that the donor relinquishes control over the property right away upon gifting it to heir
The Bombay High Court recently upheld a Senior
Citizens maintenance Tribunal judgement. It revoked gift deeds executed by an
elderly women in favour of her son and ordered the man to vacate the property.
This decision sets a precedent for the validity and revocability of gifts deeds
in India. Anyone planning to use a gift deed should acquaint herself with its
intricacies.
Key clauses
A gift deed should include essential elements
such as the description of the property or assets being transferred. It should
mention details of both the donor and the done, including their names and
addresses. “The document should contain the donor’s intent to gift the property
and confirm the donee’s acceptance.
The deed must be dated and signed by both parties
According to Section 123 of the Transfer of
Property Act of 1882 and Section 17 of the Registration Act of 1908, it is
obligatory to register a gift deed.“It is mandatory to register a gift deed
with the sub-register or else the transfer of property is not valid,
furthermore, the gift of an immovable property must be attested by at least two
witnesses.
Who is eligible?
Any person who is mentally sound and legally
competent can execute a gift deed in favour of a living done. “Minors and
individuals deemed mentally unsound cannot make a gift deed. The gift deeds
allow for the immediate transfer of assets. They come into effect during a
donor’s life time.
This helps mitigate family disputes that may
arise among legal heirs later. Their downside is that the donor relinquishes
all control over the transferred property, and certain tax implications may
also arise.
Tax implications
Generally, gifts valued above Rs 50,000 are
subject to tax in the hands of the recipient. That gift from relatives and
those received on special occasions are exempted.
Stamp duty and registration fees are payable at
the time of registering the deed. Stamp duty is calculated based on the
property’s market value or the consideration amount, whichever is higher.
The applicable rate of stamp duty varies from
state to state. “Maharashtra, for instance, imposes stamp duty based on whether
the gift deed is for movable or immovable property, whether the done is a
family relatives (the definition of relative under Income Tax and Stamp duty
may differ), and the property’s market value.
Legal position
There have been judgements regarding gift deeds
from multiple courts. The Maintenance and Welfare of Parents and Senior
Citizens Act, 2007, prescribe the revocation of gifts deed in limited
circumstances. To avoid revocation, be careful about the conditions n the deed.
“Some experts suggest executing a registered will instead, which is legally
difficult to assail post-death, rather than making a gift deed.
Will versus gift deed
While both instruments facilitate the transfer
of assets, they serve different purposes. A gift deed is effective immediately
and during the lifetime of the donor, whereas a will takes effect upon the
donor’s death. Mittal says that cash gifts exceeding Rs 2 lakh attract
equivalent penalties while gifts to wife or daughter-in-law could lead to
clubbing provisions in the hands of the door.
For those dealing with the complexities of
assets transfer, it is advisable to consult a legal expert and make an informed
decision tailored to their individuals needs.
GIFTS DEED VERSUS WILL KNOW THE KEY OWNERSHIP
Gift deed: Ownership is transferred in the name
of the done as soon as the gift deed is executed and possession of the property
is handed over to the done
Will: Ownership of the property remains with
the testator during his lifetime. The beneficiary gains ownership of the
property only after the testator’s demise.
REGISTRATION AND STAMP DUTY
Gift deed; A gift deed must be compulsorily
stamped as well as registered.
Will: A Will is neither required to be stamped
nor registered.
INCOME TAX
Gift deed: Income tax is payable if the value
of the gift exceeds Rs 50,000/-, provided the gift is not made to a relative.
Will: No tax is levied on assets received
through a Will.
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