Gifts, who would not like to receive them? Gift is something we all like to receive from our beloved ones. Giving gifts can spread joy for both the giver and the recipient.
Gift-giving is a tradition that has been part of our Indian culture for centuries. One of the fundamental aspects of gift-giving is the ability to express emotions.
Gifts serve as tangible representations of our feelings towards our beloved ones, allowing us to communicate love, appreciation and gratitude. These gifts can be in the form of sweets, cash, gold jewelry and even properties (house/land). So, gifts can be both movable or immovable properties.
In this post, let’s understand – What is a Gift? What is a real-estate property Gift Deed? What are the benefits of transferring a property through a registered gift deed? Is it possible to cancel a registered gift deed in India? What are the tax implications of gifting a real-estate property in India? (In this article, we would be explaining the concepts related to gifts of immovable property only.)
What is a Gift?
A gift is Money or House, Shares, Jewlery etc. that is received without any consideration, or simply an asset received without making a payment against it and is a capital asset for the Recipient. It can be in the form of cash, movable property or immovable property.
The person gifting his/her property is called the donor, and the person accepting the gift is the donee. A capital asset typically refers to anything the individual owns for personal or investment purposes.
The pre-requisite for a gift to be valid is – the donor must voluntarily gift the property to the donee without any consideration and the donee should accept the gift within the lifetime of the donor.
What is a Property Gift Deed?
A Gift Deed is a type of legal instrument through which a person voluntarily gifts a movable or immovable property to a person.
Is Gift deed mandatory for gifting cash, cheque or movable properties? – In case of a movable property, it is the will of parties (donor/donee) as to whether they want to get the gift deed done.
In case of immovable properties, getting Gift deed done is important, and also registration of the deed is mandatory. Without the registration of Gift deed, gifting an immovable property like Land, House building or a Flat is considered invalid in India.
“Please note that only a registered Gift deed property can be re-sold by the donee.”
How to get Property Gift Deed Registered in India?
The exchange of money in a transaction makes the difference between a gift deed and sale deed. In case of a gift deed, no exchange of money takes place. In case of immovable property, it is mandatory to register the Gift Deed as per Section 17 of the Registration Act, 1908.
The gift deed registration process in India is relatively simple, and can be completed in a few easy steps;
- Preparation of the Gift Deed: The donor and donee must agree on the terms of the gift deed, including the details of the property being gifted, and the terms and conditions of the property transfer. Both of them must sign the gift deed in the presence of atleast two witnesses, who are not beneficiaries of the gift. (Below is the sample format of the gift deed.)
- Pay the Stamp Duty & Registration charges: The gift deed must be stamped with the appropriate stamp duty as per the respective State Govt laws. The stamp duty varies from state to state and depends on the value of the property being gifted.
- In case of Sale deed registration, the stamp duty charges and registration fees can come up to 5 % to 10% of the total property cost, depending on the State the property is in and the type of purchase.
- However, if you are transferring the title of the property to a family member as a “Gift Deed”, the registration charges are very low.
- Register the Gift Deed: The registered gift deed must be submitted to the Sub-Registrar with jurisdiction over the property. The SRO will verify the identity of the parties and witnesses, and the property details, before registering the gift deed.
- Obtain the Registered Gift Deed: Once the gift deed is registered, the donor and recipient can obtain a copy of the registered gift deed from the Sub-Registrar’s office.
- Once the immovable property is registered through a gift deed, both the parties can cross-check the registration details by obtaining an Encumbrance certificate (EC). Below is a sample EC statement of one of my properties which I have received as a Gift from my grandmother.
Transferring of ownership in a property through a registered gift deed is irrevocable. Once you gift the property, it belongs to the beneficiary (receiver of gift) and you cannot reverse the transfer or even ask for monetary compensation (unless the gift deed has a specific written condition).
Registered Property Gift Deed Vs WILL?
Getting a property transferred through a registered gift deed or WILL, both are legal and valid. However, a gift deed allows the receiver (donee) to become the owner of a property during the donor’s lifetime, whereas a Will allows the receiver to be the owner of the property, only after the demise of the person who has willed it.
Another key difference between Gift deed and will is, the registration of WILL is not mandatory but registration of immovable property (vai gift deed) is mandatory to make it valid and legal. A will can be easily revoked and Gift deed can be revoked under special circumstances only.
Though Will Registration is not mandatory by law, it is advised to do so to avoid any future litigation in terms of succession.
What are the tax implications of Gifting a Property for AY 2024-25?
In case of transfer of property through a gift deed, who has to pay the taxes (if any), is it the donor or the donee?
Below are the important points that you should be aware of regarding tax implications on Gifts in general (for FY 2023-24). These points are applicable in cases where (i) both donor and donee are residents of India and (ii) if donor is an NRI and donee is a Resident Indian.
- Gifts up to Rs 50,000 a year: A recipient will not be assessed to any tax if the value of gift is less than Rs 50,000 a year irrespective of who gifts the money. Also, you need to add the total value of all the gifts received in a financial year and if the total value is less than Rs 50k then it is exempted from income tax.
- Gifts from Relatives : If you receive a property as gift from your family, there is no need to pay any income tax.
- Occasion : As per the provision of taxation of gifts, any Gift received from any person on the occasion of the marriage is not liable to income tax. There is no monetary limit attached to this exemption. But taxes are applicable if gifts are received at the time of Engagement or marriage anniversary.
Related articles :
- Kindly go through this comprehensive article with examples on Gifts & Tax implications @ Got a Gift? Find out, if it is Taxable or Tax-free?
- Cash Gifts above Rs 2 Lakh can be subject to Penalty u/s 269ST w.e.f 1st April, 2017, even if the gifts are from family members. Kindly read my article: ‘Rs 2 Lakh Cash Transaction Limit | Details & Examples‘.
- In case the donor is Resident Indian and donee is an NRI, the tax implications of gifting a property can be understood in this detailed article @ Latest NRI Gift Tax Rules | Gifts to NRIs can be Taxable now!
Sale of Gifted Property & Tax implications
Property received on inheritance or through Gifts from family members are tax-exempt. At the same time, you (inheritor / Donee) are receiving them without any consideration.
Now, let’s say you would like to sell this gifted property for certain amount. In this case, your purchase price is NIL. Does this mean you do not have to pay any taxes on re-sale of gifted property?
Whenever certain assets are sold and particularly when such assets have been received by way of gift or through Will or by succession or by inheritance, then the cost of acquisition of the asset will be deemed to be the cost for which the previous owner (donor) of the property acquired it.
Date of acquisition by donor considered as the Date of Purchase. So, kindly note that the date or year of inheritance / receiving the gift are of no importance in capital gain tax calculations. (Read more @ Sale of Inherited (or) Gifted Property & Tax implications on Capital Gains)
Property Gift Deed & FAQs
Below are some of the FAQs on transferring the property through a gift deed;
- Can the property gift deed be registered in the name of a minor? – In case the property is gifted to a minor, the legal guardian must accept it on the minor’s behalf.
- Can a gift deed be cancelled by the donor? – Once registered, a gift deed can not be revoked unilaterally. It must have the signature and consent of the donee (receiver) as well.
- Who pays the Stamp duty on a registered gift deed? – Donee generally pays the stamp duty for the registration of gift deed.
- Can a property received as a gift be sold? – If there are no conditions attached to the registered gift deed, the donee can sell the property.
- After the registration of property via Gift deed, who is liable to pay dues? – The donee becomes the legal owner and will then need to pay all the pending/unpaid dues and charges, such as electricity and maintenance charges and property taxes.
- I got a gift from my Parents, do i need to declare the gifted property value in my Income Tax Return (ITR)? – If you get a property through a registered gift deed (wherein your PAN or Aadhaar is quoted), you can show the value of the gift received as ‘Exempted Income‘ in ITR. This is to avoid any scrutiny by income tax authorities in the future.
- Can I add my spouse as co-owner of a property owned by me through a registered gift deed? – Yes, by doing so, she gets the ownership rights on the property. Co-owning a property can be beneficial for married couples because if one of the partner dies, the surviving spouse automatically becomes the sole owner of the house. So, the transfer of rights becomes easy. Another advantage is that if the couple has taken a home loan jointly, each person can avail of the tax benefits.
- What if you want to gift your property after your demise? – If you want to gift your property after your demise, you need to make a Gift Deed during your lifetime. Your legal heir (donee) or your legal representative can get it registered after your demise.
- Can a mortgaged property be gifted? – As per Section 128 of the Transfer of Property Act, a donor can gift a mortgaged property. However, the donee (receiver of the gift) will be personally liable for all the debts and liabilities that are associated with that property.
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(Post first published on : 03-Aug-2023)
