Guide to Gifting A Property

Planning to give property to a loved one this festive season? Here’s what you need to know about preparing a gift deed for a safe and propitious transfer of ownership

File photo
File photo

If you’re thinking about giving your children or loved ones something meaningful this festive period, real estate is a gift they are likely to cherish for a lifetime. In simple terms, gifting property is the transfer of ownership of one’s property to another via a gift deed. “Transferring property via a gift deed can prevent any kind of inheritance dispute in the future. Another advantage of a gift deed is that its execution doesn’t require one to go to a court as in the case of a will,” says Shruti Bansod, a real estate consultant. Here is a breakdown of all the relevant aspects of a gift deed.

Gift deed vs Will: It’s important to understand the difference between a gift deed and a will. A gift deed is executed during the lifetime of a donor and the transfer happens immediately. In the case of a will, the transfer can take place only after the death of the owner. “A will can be changed multiple times during the life of the owner. However, in a gift deed, it can only be revoked if there is a prior agreement between the two parties mentioning any withdrawal arising from a conflict,” shares Mithun Chawla, a lawyer, who specialises in property transactions. Once the property is gifted, the new owner is responsible for paying any dues pertaining to the property like maintenance bills, etc.

Drafting a Gift Deed: Study and understand the various clauses and terms that are included in a gift deed. Enlist the services of an experienced lawyer to ensure a seamless transfer of ownership. “Our gift deed was [drafted] based on a certain format, wherein a couple of important details were mentioned such as the description of the property, relationship between the donor and recipient, liabilities and even a revocation clause,” says Manoj Krishnan, whose mother recently gifted him an apartment.

The gift deed must state that there was no coercion to gift the property and that it was given out of love. Relevant details of the donor, recipient and witnesses should be mentioned as part of the documentation process. The deed should also state that the donor is solvent and that there are no pending dues to be made to banks or lenders.

Registration of the Gift Deed: Once the draft is finalised, the gift deed should be registered in the presence of both parties. This registration is usually done at a local sub-registrar office. Supporting documents such as the property agreement papers, society registration certificate, and valid government proofs of the donor and recipient should be submitted at the office. One also needs to pay a fee at the time of registration, along with stamp duty charges, which vary with every state.

Taxation on Gift Deed: “Under the Income Tax Act, 1961, the gift (in this case, the property) will not be taxed if it is received by an individual from any blood relative. However, stamp duty and registration fees must be paid to establish its legal status,” says Sharad Munshi, a legal expert. If the transfer of property (where the stamp value exceeds ? 50,000) is made to an individual who is not a blood relative, then the entire stamp duty value of the property is chargeable to tax.

Revocation of Gift: Once the property is gifted, there is also a way to revoke it in case of conflict with the recipient. However, this must be explicitly stated in the contract. “Unless the donor specifically mentions that they have the right to take the property back, revoking the gift is not possible. We included this clause in the gift deed we recently drafted to protect our rights as well,” says Vinay Chauhan, who is in the process of gifting his Khar flat to his son. By following these suggestions, you can gift the property in a safe and secure manner, making this festive season all the more memorable.