Gift deed in India: An Overview

 Gift deed in India: An Overview

A gift deed is a legal document that transfers the ownership of a property or asset from one person to another without any exchange of money. It is an instrument of transfer of property that is commonly used in India to gift property to family members or close relatives. In this blog, we will discuss the validity and structure of a gift deed in India.

Validity of a gift deed

To be legally valid, a gift deed must fulfill certain legal requirements. These requirements are outlined in the Transfer of Property Act, 1882 and the Indian Registration Act, 1908. The key requirements for a gift deed to be valid are:

Competency of parties

The donor and the donee must be competent to enter into a gift deed. This means that they must be of sound mind, not minors, and should have the legal capacity to transfer and receive property.

Free consent

The gift must be made by the donor out of his or her free consent. This means that the donor should not be under any undue influence or coercion and should fully understand the implications of the gift.

Acceptance

The gift must be accepted by the donee. Acceptance can be express or implied, but it must be made during the lifetime of the donor.

Delivery

The gift must be delivered by the donor to the donee. Delivery can be physical, constructive, or symbolic, but it must be unconditional and irrevocable.

Registration

The gift deed must be registered with the Sub-Registrar of Assurances in the jurisdiction where the property is located. This is a mandatory requirement under Section 17 of the Indian Registration Act, 1908, and failure to register the gift deed can render it invalid.

 

Structure of a gift deed

The gift deed must be drafted in a specific format and must contain certain essential elements. These include:

a) Title

    The gift deed should have a clear and concise title that reflects the purpose of the document. This can be "Gift Deed" or "Deed of Gift".

b) Introduction

The introduction of the gift deed should include the names and addresses of the donor and the donee, as well as a brief description of the property being gifted.

c) Recitals

The recitals of the gift deed should provide the context and background of the gift. This can include the reason for the gift, the relationship between the donor and the donee, and any other relevant details.

d) Operative clause

The operative clause of the gift deed is the section that actually transfers the property from the donor to the donee. This should be clearly worded and should specify the nature and extent of the property being gifted.

e) Consideration

The gift deed should explicitly state that no consideration has been exchanged between the donor and the donee. This is a key requirement for a gift deed to be valid, as any exchange of money or other consideration would render the gift deed void.

f) Covenants

The covenants of the gift deed are the promises made by the donor and the donee. These can include promises to maintain the property, pay taxes, or otherwise fulfill the obligations associated with ownership of the property.

g) Registration details

The gift deed should include the details of the registration, including the date and time of registration, the Sub-Registrar of Assurances, and the registration number.

h) Signatures

Finally, the gift deed should be signed by the donor and the donee, as well as two witnesses. The signatures should be witnessed by an authorized person, and the gift deed should also include the date of signing.

 

In addition to being a legal instrument of property transfer, a gift deed can also be used as a tax-saving instrument in India. By gifting property to a close relative, an individual can not only transfer the ownership of the property but also reduce their tax liability.Under the Indian Income Tax Act, 1961, gifts made by an individual to a specified list of relatives are exempt from tax. These relatives include parents, spouse, siblings, children, and lineal ascendants and descendants. Any gift made to these relatives is considered as tax-free income and is not subject to tax. Thus, if an individual gifts a property tAo a close relative through a gift deed, they can not only transfer the ownership of the property but also reduce their taxable income. This can be especially useful in cases where the property has appreciated significantly in value, as the capital gains tax on the sale of the property can be substantial.