GIFT DEED

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.

 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.

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

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: 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.

ADVANTAGES 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

• 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.

THINGS TO REMEMBER RELATING TO GIFT DEED-

• 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.

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.