Everything You Need to Know About a Gift Deed

Estimated reading time: 11 minutes

Have you ever wanted to give something valuable—like a house, a piece of land, or even a cherished family heirloom—to someone you care about, without expecting anything in return? Maybe you’re considering passing your property on to your children or making a generous donation to a charity close to your heart. That’s where a gift deed comes into play. It’s a legal way to transfer ownership of your assets to someone else out of love, affection, or goodwill, without any money changing hands. 

This blog explores what a gift deed is, how it works, and the steps to complete it correctly. Whether you’re thinking about giving or receiving a gift of property, understanding gift deeds can help make the process smooth and hassle-free.

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What is a Gift Deed?

A gift deed is a legal document that records the voluntary transfer of ownership of property or assets from one person (the donor) to another (the donee) without any exchange of money or compensation.

Think of it like you want to give your sibling a piece of land. A gift deed properly documents this generous act. It clearly states that you’re giving this asset willingly, without expecting anything in return. This not only makes the transfer smooth but also helps prevent any misunderstandings or disputes later on.

Who is Involved in a Gift Deed?

A gift deed involves two key parties to ensure the legal transfer of property:

1. Donor:

• The person who gives the gift.
• Must be the lawful owner with a clear and undisputed title to the property.
• Should make the gift voluntarily, without any coercion or undue influence.

2. Donee:

• The person who receives the gift.
• Must accept the gift during the lifetime of the donor for the deed to be valid.
• Gains full rights to the property upon acceptance and registration of the gift deed.

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Can Minors Be Involved in a Gift Deed?

• Minors Cannot Act as Donors:
  • Minors are legally incapable of entering into agreements.
  • They cannot gift property because they lack the legal capacity to do so.
    
• Guardians Can Accept Gifts for Minors:
  • A guardian can accept a gift on behalf of a minor.
  • This means minors can be donees (recipients) in a gift deed.
    
• No Consideration Required:
  • The donor must make the gift without any consideration.
  • The donor should not receive anything from the donee in exchange for the gift.

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What Can Be Gifted Through a Gift Deed?

Types of Properties
Immovable Properties	Includes land, any benefits arising out of land, or anything attached to the earth.Excludes growing crops, standing timber, or grass.
Movable Properties	Encompasses all properties not classified as immovable.

Conditions for Gifting

Types of Properties
Existing Properties Only	The donor can gift only properties that exist at the time of registering the gift deed. Properties expected to be acquired in the future cannot be gifted.
Lawful Ownership	The donor must be the legal owner of the property at the time of making the gift. Only properties owned outright by the donor are eligible for gifting.

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What Should a Gift Deed Include?

1. Voluntary Transfer:
Clearly state that the donor is giving the property of their own free will, without any pressure or coercion.

2. Donor and Donee Details:
Include the full names, addresses, and relationship between the donor (the giver) and the donee (the receiver).

3. No Monetary Consideration:
Specify that you are making the gift out of love or affection, with no money or compensation exchanged.

4. Property Description:
Provide detailed information about the property, such as dimensions, layout, and area, to eliminate any future confusion.

5. Donee’s Rights:
State that the donee has full rights over the property after the transfer and can sell, lease, rent, or mortgage it as they wish.

6. Acceptance by the Donee:
Mention that the donee has accepted the gift willingly.

7. Witnesses:
At least two witnesses should sign and attest the deed. Include their names and addresses in the document.

8. Revocation Clause:
It’s generally advisable not to include a revocation clause since the gift is voluntary and ownership transfers immediately upon execution.

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Gift Deed Under the Transfer of Property Act

The Transfer of Property Act of 1882 governs the use of gift deeds in India. This Act specifies that the donor must transfer a gift without receiving any payment or compensation in return. Additionally, for the gift to be valid, the donee must accept it during the donor’s lifetime.

The Registrar or Sub-Registrar’s office must register a gift deed for it to become legally effective under the Act. Once the registration is complete, the transfer of property rights is immediate and binding.

Requirements for a Valid Gift Deed

Requirement	Description
Existing Property	The property being gifted must exist at the time of making the gift. Future properties or assets cannot be included.
Lawful Ownership	The donor must be the legitimate owner of the property, possessing a clear and undisputed title.
Voluntary Transfer	The gift must be made voluntarily, without any coercion, pressure, or undue influence on the donor.
No Monetary Consideration	The transfer should occur without any exchange of money or other forms of consideration from the donee.
Acceptance by the Donee	The donee must accept the gift, and this acceptance must occur while the donor is still alive.

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How to Register a Gift Deed?

1. Draft the Gift Deed on Stamp Paper:

• Use stamp paper of the appropriate value (varies by state).
• Include all necessary clauses and detailed property information.

2. Signatures:

• Donor and donee sign on all pages of the gift deed.
• Attest the deed with signatures of at least two witnesses.

3. Acceptance by Donee:

• Donee must accept the gift during the donor’s lifetime.
• Donor must be of sound mind at the time of gifting.

4. Registration at Registrar/Sub-Registrar’s Office:

• For immovable property: Register in the jurisdiction where the property is located.
• For movable property: Register in the jurisdiction where the donor resides.

5. Submit Documents and Pay Fees:

• Provide the signed gift deed and required identification documents.
• Pay the registration fees and any applicable charges.

6. Complete Registration:

• Registrar verifies the documents and processes the registration.
• Upon registration, the transfer of property is legally effective immediately.

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Tax on Gift Deed

When you receive a gift, it’s essential to understand how it affects your taxes under the Income Tax Act of 1961, specifically Section 56(2)(x), which has been in effect since April 1, 2017.

1. Receiving Money as a Gift:
   • If you receive money exceeding ₹50,000 without any consideration (meaning you don’t provide anything in return), the entire amount becomes taxable. This sum is taxed under the category of “Income from Other Sources.“
     
2. Receiving Immovable Property as a Gift:
   • If you receive an immovable property (like land or a house) without paying anything for it, and the stamp duty value exceeds ₹50,000, the stamp duty value is taxable in your hands. This is also reported under “Income from Other Sources.”
     

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Exemptions: When Gifts Are Not Taxable

Certain gifts are exempt from taxation, meaning you won’t have to pay taxes on them if they meet specific criteria:

• Gifts from Relatives:
  • Gifts received from specified relatives are fully exempt. Relatives include your spouse, siblings, siblings of your spouse, siblings of either of your parents, or any direct ancestors or descendants (like parents, grandparents, children, and grandchildren).
    
• On the Occasion of Marriage:
  • Any gifts you receive on your marriage, regardless of the amount, are not taxable.
    
• By Will or Inheritance:
  • Gifts received through a will or by way of inheritance are exempt from tax.
    
• In Contemplation of Donor’s Death:
  • If you receive a gift because the donor anticipates their passing, this gift is not taxable.
    
• From Local Authorities:
  • Gifts from local government bodies, as defined in the tax laws, are exempt.
    
• From Certain Institutions:
  • Gifts from funds, universities, foundations, educational or medical institutions, or hospitals specified under Section 10(23C) are not taxable.
    
• From Registered Trusts or Institutions:
  • Gifts received from trusts or institutions registered under Section 12A or 12AA are exempt from taxation.
    
• From Trusts Established for Relative’s Benefit:
  • If you receive a gift from a trust that was set up solely for the benefit of your relative, it is not taxable.

Take a Note:

• No Consideration Involved:
  • To qualify under these tax rules, the giver must transfer the gift without expecting any payment or compensation in return.
    
• ₹50,000 Threshold:
  • The ₹50,000 limit is crucial. If the value of the gift exceeds this amount and does not fall under any exemption, the entire value becomes taxable.
    
• Reporting Income:
  • You must report taxable gifts under “Income from Other Sources” when filing your income tax return.

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How to Cancel a Gift Deed?

Step 1: Draft and File a Petition
Begin by preparing a petition addressed to the court requesting the revocation of the Gift Deed. Additionally, In this petition, the donor should clearly outline the reasons and specific clauses that justify the cancellation of the deed.

Step 2: Issue Notices to All Parties
Once you submit the petition, the court will send notices to all relevant parties involved in the Gift Deed, including the donor and the donee, informing them of the legal action.

Step 3: Prepare for the Hearing
After the petition is filed, a hearing date will be scheduled. In the meantime, The petitioner must gather and submit all necessary documents, evidence, records, and any other supporting materials that strengthen the case for revoking the Gift Deed.

Step 4: Present the Case in Court
During the hearing, the court will listen to the arguments presented by both the petitioner and the donee. Both sides will have the opportunity to present their evidence and make their case.

Step 5: Court’s Decision on the Grounds for Cancellation
The court will evaluate the legitimacy of the reasons provided for the gift. Subsequently, If the court determines that the grounds for the gift are valid and justify cancellation, it will issue an order revoking the Gift Deed.

Step 6: Update Registration Records
After the court officially cancels the Gift Deed, the petitioner should visit the registration office where the original deed was registered. They must present the court’s ruling in order to remove the Gift Deed from the registration records, ensuring the cancellation is formally documented.

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Gift Deed vs Will 

Here’s a differentiation table between a Gift Deed and a Will:

Aspect	Gift Deed	Will
Definition	A legal document that transfers ownership of property or assets voluntarily without any consideration.	A legal document that outlines how a person’s assets and affairs should be handled after their death.
Timing of Transfer	Immediate transfer of ownership upon execution and registration.	Transfer of assets occurs only after the testator’s death.
Consideration	No monetary consideration is involved; it’s a gift.	No consideration is required; it’s a directive for posthumous distribution.
Revocability	Generally irrevocable once executed and registered.	Revocable during the testator’s lifetime; can be amended or revoked.
Execution Formalities	Must be executed as per the legal requirements, including registration under relevant laws (e.g., Stamp Act).	Must be executed in accordance with legal formalities, which may include witnesses and notarization, depending on jurisdiction.
Tax Implications	May attract gift tax depending on the jurisdiction and the value of the gift.	Typically subject to estate or inheritance taxes, not gift tax.
Purpose	Primarily used for transferring property or assets during the lifetime of the giver.	Used to provide instructions for asset distribution after death and appoint executors or guardians.
Legal Ownership	Ownership is transferred to the recipient immediately upon execution.	Legal ownership remains with the estate until the will is probated after death.
Flexibility	Limited flexibility once the deed is executed and registered.	High flexibility to change terms as long as the testator is alive and competent.
Probate Requirement	Does not require probate as the transfer is immediate and documented.	Requires probate to validate the will and oversee the distribution of assets.
Common Uses	Gifting property to family members, friends, or charitable organizations during one’s lifetime.	Distributing a wide range of assets, appointing executors, guardians for minors, and setting up trusts after death.

Revoking a Gift Deed

A gift deed can be revoked under certain conditions as per Section 126 of the Transfer of Property Act, 1882. The key conditions are:

• Both the donor and donee must agree to the revocation terms in order to revoke a gift deed. The donor cannot revoke it solely at their discretion.
  
• You can revoke it like any contract, except for reasons such as non-payment or failure of consideration.
  
• Revocation can be full or partial.

However, the donor’s death makes the gift deed irrevocable, although legal heirs can act on the donor’s behalf.

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Conclusion

A gift deed is a powerful tool for transferring property ownership without monetary consideration, but it comes with specific legal and tax implications. By thoroughly understanding these aspects, you can ensure that your property transfer goes smoothly, without future legal complications.

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Frequently Asked Questions