Gift Deed Registration in India: Is it necessary to register a gift deed?

The Transfer of Property Act, 1882 (“Act”) governs property transfers as gifts in India. A gift of property is transferring of ownership of one’s property to another person through the execution of a gift deed. A gift deed is an instrument through which the owner of immovable or movable property conveys his/her property to another; person as a gift without compensation. In this article, we’ll discuss Gift Deed Registration in India.

Key Abstract

A gift of property is transferring of ownership of one’s property to another person through the execution of a gift deed. A gift deed is a transfer of instrument through which immovable or movable property from one person to another; as a gift without or with insufficient compensation.

The individual giving his or her property is the donor. The person receiving the gift is the donee. To be legitimate under the Act, the donor must freely donate the property to the donee. For the gift to be legally legitimate, the donee must accept it during the donor’s lifetime.

When the gift deed is on record with the relevant Registrar or Sub-Registrar, the gift of immovable property becomes effective. The gift of moveable property becomes effective as soon as the gift deed gets registered or at the time of delivery of the property. When a gift deed is recorded, the property is transferred from the donor to the donee instantly. And the parties do not need to go to court to have it executed.

Before we move on to Gift Deed Registration in India. Let us look into what is “Gift”.

The Gift 

A Property Gift is transferring ownership of one’s property to another person by the execution of a gift deed. The Gift Deed is an instrument that conveys immovable or movable property as a gift without or with insufficient compensation.

Definition of Gift

We can define the term “gift” with the help of the following laws:

• Section 122 of the Transfer of Property Act, 1882 defines a “Gift” as: A gift is a willing and without consideration transfer of existing movable or immovable property from one person to another. And it is accepted by or on behalf of the donee.

• Section 56 of the Income Tax Act, 1961 defines a “Gift” as: A “gift” refers to any quantity of money or property obtained without consideration. Or in cases when the property is acquired for an insufficient payment.

Gift Deed Registration in India

When the donor desires to provide immovable property to the donee, the registration of the gift deed must take place. The reason behind the transfer of the gift deed must be out of love and care for the donee, with no expectation of payment in return.

The gift of immovable property is lawful under Section 123 of the Transfer of Property Act, 1882 when made through a registered gift deed signed by the donor and the donee and witnessed by two witnesses. When giving under a registered gift deed or by handing the property to the donee, the gift of moveable property is lawful.

To get registered, the gift deed must be in writing on stamped paper and include all of the provisions. The donor and donee have to sign all pages of the gift deed, along with two people as witnesses. To be legitimate, the donee must accept the gift during the giver’s lifetime and while the donor is of sound mind.

The stamp paper used to complete the gift deed varies in value from state to state. The stamp paper gift deed must be registered with the Registrar or Sub-office Registrar’s in the jurisdiction where the property to be donated is located. If the property is moveable, the Registrar or Sub-office Registrar’s has authority over the donor’s residence.

Provisions in a Gift Deed

The following provisions must be present in the gift deed:

• Donor and Donee Information: The gift deed should include the donor’s and donee’s names, addresses, and relationships.
• Consideration: The gift deed should state that the donor is giving the gift property out of love and compassion for the donee. And that no other sort of consideration is present in the transfer.
• Voluntary Transfer: The donor should state in the gift deed that he or she is voluntarily and freely transferring ownership of the gift property to the donee. There should be no fear, compulsion, or threat throughout the transfer.
• Property Ownership: The gift deed should state that the property exists, that the donor is the absolute owner of the gift property, and that the donor has handed ownership of the gift property to the donee.
• Property Specifications: The gift deed should provide a full description of the property.
• Donee’s Rights: The donee’s rights should be present in the gift deed. It comprises the donee’s rights to peaceful enjoyment of the property as well as the ability to sell, mortgage, or lease the property.
• Acceptance of the Gift by the Donee: The gift deed should state that the donee accepts the property as a gift.
• Delivery: The gift deed should directly or implicitly state that the gift property will be delivered to the recipient.
• Witnesses: The names and addresses of the witnesses should be on the gift document. It is mandatory for two witnesses to sign and attest their initials on the document. 
• Revocation: A revocation clause of the gift property is not necessary to be present in the gift deed, but it is the recommendation of the experts that it should be present in the document to avoid future controversy.

The Parties in a Gift Deed

A Gift Deed has two parties:

• The Donor and;
• The Donee. 

The donee is the person who receives the property, while the donor is the one who donates his property. At the time of the donation, the donor must be of sound mind and capable of entering into agreements.

A minor is unable to give property since he or she is unable to engage in contracts. The guardian of a child, on the other hand, can receive presents on behalf of the minor. The donor should give without expecting anything in return. That is, the donor should not get anything from the donee in exchange for making the gift.

Applicable Tax Implications on Gift Deeds

After April 1, 2017, gifts are taxable under Section 56(2) (x) of the Income Tax Act, 1961. When a person receives a quantity of money in excess of Rs.50,000 as a gift without consideration, the entire value of the present is taxable in the hands of the donee under the heading ‘Income from other sources.’

When a person gets an immovable property as a gift without consideration and the stamp duty value of the gift deed exceeds Rs.50,000, the stamp duty value of the property becomes taxable in the hands of the donee under Section 56(2)(x)(b).

However, if the property or sum is received from one of the following individuals, the gift is free from tax, and the donee is not taxed:

• If the gift is received from relatives,  
• Further, If it is received on the occasion of the individual’s marriage, or 
• If it is received under a will or by way of inheritance, or 
• Further, if it is received in anticipation of the donor’s death, or 
• If it is received from a local authority (defined in Explanation to Section 10(20) of the Income Tax Act), or 
• Furthermore, if it comes from a fund, university, foundation, other educational institution, other medical institution, hospital, trust, or institution referred to under Section 10 (23) (C) of the Income Tax Act, or 
• If it comes from a trust or institution registered under Section 12A or 12AA, or 
• If it comes from a trust established or created solely to benefit an individual’s relative.

Is it necessary to register a gift deed or is it optional?

The following sections of the Transfer of Property Act, 1882, as well as sections 17 and 18 of the Registration Act, 1908, clarify whether or not gift deed registration is required.

• As per Section 123 of the Transfer of Property Act, 1882: An instrument having a signature by or on behalf of the donor and attested by at least two witnesses must be used to make an immovable property donation. A registered instrument signed as stated or delivery may be used to transfer moveable property for the purpose of making a gift. This delivery might be done in the same way that products sold are delivered.

• As per Section 17(1)(a) and Section 18(d) of the Registration Act, 1908: Registration of documents for the gift of immovable property is mandatory under Section 17(1)(a). On the contrary, Section 18 (d) of the Act requires the registration of instruments (other than wills) that purport or function to establish, declare, assign, restrict, or extinguish any right, title, or interest in moveable property.

Endnote 

To summarise, a gift deed is a document in which a donor freely transfers a movable/immovable item to another person. A gift deed must be registered, and registering a gift deed entails paying the necessary registration fees.