A Gift Deed refers to, in simple terms, we can say that a gift Deed is a written document that the donor drafts in favor of the donee. The term “donor” refers to an individual who offers a gift, while a donee refers to someone who receives the gift from the donor. Through the Gift Deed, the donor can easily transfer property they would like to gift to someone else, as per law.
The general intent of the donor in creating the Gift Deed is to express love, affection, charity, or any other purpose. Creating a Gift Deed is not a requirement for gifting any property to someone else.
However, it is recommended to prepare or execute a Gift Deed in writing form to prove the legitimacy of future gifts with the document record and evidence to ensure that the Gift Deed can be enforceable by the law.
Now the question is, what type of property can be gifted? Any property can be a gift like, movable or immovable, which is transferable and tangible.
If we look at the provision under Section 122 of the transfer of property act 1882, there is mention that gift refers to the act of transferring a specific property, be it moveable or immovable, and such transfer is done by the donor voluntarily without any consideration.
These terms should be explicitly stated on the Gift Deed that there is no consideration, payment, or compensation in exchange for the transfer of property.
The person who is giving the gift may be subject to taxes on the transfer of the property or assets. The tax is typically paid by the person giving the gift and is calculated according to the market price of the asset or property at the time of the gift. The recipient may also be subject to taxes on the assets or property acquired through the gift. In general, the taxation on gift deeds can differ depending upon the laws of each country and the value of the asset or property being transferred. However, gift deeds in blood relation ( as well as wedding presents) are exempted from taxation.
(1) What are the main components of a Gift Deed?
Here are some important things we need to know in order to create a legal and effective gift Deed in India. These aspects are necessary to include within the Gift Deed.
- In order to create a valid gift deed, two people must be required, for example, the Donor and Donee. The relationship between the Donor and the Donee is an essential element of the gift Deed.
- There isn’t an obligation that Donor and Donee are blood relatives. Third-persons can be a Donee without any blood relationship.
- The transfer must be entirely voluntary with the donor’s donative intent and without any pressure or fraudulent intention.
- The transfer should be made without any consideration, and no money transaction or compensation should be aspected by the donor. The gift deed must be executed out of pure love and affection.
- If Donee doesn’t accept the gift property of the donor, the gift deed will be ineffective. That way, Donee must have to accept the transfer of property during his lifetime according to the obligatory requirement of a valid Gift Deed.
- If the donor wishes for other rights or liabilities arising from the gift property, it must be specifically stated in writing form.
For instance, these rights must be based on how you benefit from the property or any other income or profits derived from the property. Therefore, if the property is subject to future expenses, like maintenance for the property, the tax should be explicitly stated in the deed.
- A delivery clause should be included, which will verify the delivery of the property’s possession.
(2) Who can execute a Gift Deed?
Anyone with a sound mind can execute a Gift Deed, and as a donor, he’s a competent person who can make the Gift Deed as per his desire and then transfer it to the intended recipient.
As we all know, a Gift Deed is a legal contract; therefore, here’s one thing to understand: minors cannot sign a Gift Deed. A contract signed by the minor is not valid in accordance with the law. A minor cannot be a donor to do a Gift Deed. Thus, a Gift Deed created by a minor is null, unenforceable, and not legal.
(3) Who is a Donee?
Any person who receives and accepts a gift from the donor is referred to as a donee. The donee may be a blood relative such as a brother, son, father, mother, etc. A Gift Deed can also be executed without blood relations, like a relative, nephew, friend, non-government organization, etc.
In the case of minors- If the donor wishes to give a gift to a minor, no law states that a minor cannot be a donee. The minor’s natural guardian may accept a gift on behalf of the minor. They can accept the gift as an agent or manager of a minor. But, once they become an adult, the minor can decide whether they have accepted a gift or not.
(4) Whether a Gift Deed should be registered?
The answer is yes. the gift deed must be registered. According to section 17(1)A of the registration act, there is an explicit mention that instruments of the gift of immovable property must be compulsory to register, and the Gift Deed Registration Charges must be paid.
The first thing we need to be aware of is that without registration of the Gift Deed of the immovable property, the property is of no value in the eyes of the law. However, there isn’t an obligation of registration to transfer movable property. A Gift Deed must be registered at the registrar or sub-registrar office of your town area.
(5) What necessary steps are involved in drafting a Gift Deed?
Here are the steps to be included in the process of gift drafting to make a legal gift in India.
The first step is to draft a Gift Deed; There is mention of the full name of a donor and a donee with a residential address, the date of birth, and the relationship between the donor and the donee( if there is any).
- Mentions the complete information of properties which is donor wants to gift to the donee.
- To put on both parties’ signatures along with two attesting witnesses’ signatures on the Gift Deed, which is an essential part of a valid Gift Deed.
- The next step is to attach a stamp paper that counts upon the properties’ value, which might differ from state to state.
- The next step is to file a Gift Deed in the nearest registrar’s or sub-registrar’s office. This is an essential part of a valid gift deed in India as per the law.
(6) What kind of documents are needed for the registration of a Gift Deed?
These kinds of documents are commonly used for the registration process of a Gift Deed. ( These types of documents may be altered or different for registration purposes.)
- The first is a copy of an original Gift Deed that wants to register.
- Identification proofs of parties ( Donor, Donee, witnesses) such as pan card, Aadhar card, etc.
- Documents of the donor’s property for proof of the donor’s title.
- Any other documents like valuation certificate of property or other tax-related documents related to property, etc.
(7) Which type of property can be gifted?
The following types of property can be a gift through a Gift Deed:
- It must be an existing movable or immovable property, like cash, land, shares, etc.
- It should be a transferable property.
- Any property that probably exists in the future but doesn’t exist today should not be included in the gift deed.
- It should be tangible property.
