Everyone wants to pass on their precious valuables to their loved ones. Although gifting doesn't involve any significant procedure, when it comes to immovable assets, for it to be legalised, gift deeds are created.

What Is a Gift Deed?

If you give away property or something valuable to another person (relative or others) without receiving any money in return, it is a gift.

A gift deed is a legal document to transfer the property from a donor (owner of the property)  to a donee (a person who receives the transfer of property through gift deed) without any consideration. It is valid only if it is registered at the Sub-Registrar Office in the area where the property is located.

It could be a legal document that describes a voluntary transfer from the donor (owner of the property) to the beneficiary (receiver of transfer of property through gift deed) with none exchange of cash. It's outlined beneath Section 122 of the Transfer of Property Act, 1882, that conjointly states that any immovable property will be transferred through a gift deed.

What Should Be Included in a Gift Deed?

Apart from the details of the property, donor, donee details, a gift deed should include the relationship of the donor with the donee, and the details of how to transfer property through gift deed if donee accepts the gift.

It wants the specification of the very fact that the receiver need not try to perform any work or need to fulfil any requirements for the possession of the received gifts. The gift deed is drawn upon the concept that the giver is doing the deed of contribution out of the sensation of heart for the recipient. The one that desires to give the gift deed, to transfer of property through gift deed or add of cash to the recipient is named donor.

Why Do You Make a Gift Deed?

If you want to transfer property through a gift deed to your close relative without receiving anything in return, you can make a gift deed.

Sometimes, a gift deed is preferred over a will as you can transfer the ownership immediately to the donee. In case of a will, the donee will get the property only after the donor's death.

As a gift deed is registered, it makes the transfer legal. Whereas, the transmission through a will may be prone to litigation.

How Do You Make a Legally Valid Gift Deed?

The first step is to create a deed that contains details of the property, donor, donee, which states that the property is gifted (without any consideration).

Then, get the property valued by an expert. It is done to calculate the stamp duty that must be paid at the time of registering the gift deed.

Next, you must print it on a stamp paper.

Take the signature of the donor, donee and two witnesses who can vouch for the transaction.

Finally, register the gift deed after paying the stamp duty and registration charges at the Sub-Registrar’s Office.

Any Gift Deed, movable or immovable, if opposed in court can stand as upholding or supporting proof on condition that it's registered. Though the Gift Deed of a Movable property doesn’t mandate registration within the transfer of property through gift deed Act, you'll or might not register. However, it's vital to recollect that Associate in Nursing unregistered Gift Deed isn't wrongfully secure. 

On the opposite hand, the transfer of the immobile property below The Registration Act, 1908 the Gift Deed registration is created mandatory. Also, registration petitions the consent of each the parties, i.e., the Donor and therefore the receiver. There is also instances wherever you may need to gift an automotive, villa or property and possibilities although few, square measure and the recipient might refuse to accept the Gift. Excluding rendering the Gift Deed void from the start, it can't be registered.

It is mandatory for the donee to accept the gift during the lifespan of the donor. In contrary situations, if the donee doesn’t endure the gift deed, it is procured to be invalid.

What If the Receiver Is a Minor?

Legally speaking, one who owns the property will create a gift deed to the other person. AN exception to the current rule is that the case within which either of donor or beneficiary may be a minor. Minors don't seem to be eligible to contract; thus, they can not transfer property as a present. A present deed just in case of the donor being a minor is not valid. In case of a beneficiary being a minor, a natural guardian will settle for a present on his behalf. Guardian acts as a manager of the talented property, and if the gift is substantial, the duty can't be enforced on beneficiary till he/she may be a minor. Once the recipient is AN adult, he should either settle for the burden or come back the gift.

What Are the Documents Required for Gift Deed Registration in Hyderabad?

The documents required for gift deed registration in Hyderabad are as follows:

• The title deed of the property
• Proof of identity and proof of address of the donor, donee, and the witnesses.
• Encumbrance certificate.
• Give the details of the property.

When Is a Gift Deed Considered Eligible?

A gift deed is eligible if it satisfies the conditions given below:

• You can gift movable or immovable property. In the case of immovable property, the gift deed must be registered at the Sub-Registrar’s office.
• You can only gift a tangible (it must have a value and can be seen) and movable property — for example, cash, jewellery, immovable property, painting, antiques, and so on.
• You can give a gift to a minor, whose guardian will manage and handover the property when the minor turns 18 years old.
• The donor must voluntarily gift it.
• The donee must accept the gift when the donor is alive. He can receive by taking possession of the property.
• The donor and donee should be alive when it is gifted. Therefore, you cannot transfer a house to an unborn child.
• The donor must be older than 18 years. A minor cannot gift any property to another person.

Why Should It Be Registered?

If you are giving an immovable property as a gift, you must prepare a gift deed that must be registered at the Sub Registrar’s Office.

As the gift deed transfers the ownership of the property, the transfer becomes legal only when it is registered.

You can register the transfer within four months of executing the gift deed. Even in that case, the document will be valid from the date of execution and not from the time of registration.

To register a gift deed, you must pay stamp duty and registration charges as specified by the state government. The stamp duty rates are available here.

How Much Stamp Duty Do I Need to Pay in Case of “Gift Deed” in Hyderabad?

As per the particular state rules where the property is located, one is liable to make payment for gift deed through DD or can pay cash at the respective  Sub-Registrar office.

The following table gives the % of stamp duty charged in case of a gift deed:

Note: The stamp duty, registration fee and transfer duty are charged on the higher of the market value or consideration.

For more details on ready reckoner rate for stamp duty here.

• Income tax implication

According to the provisions of the Income Tax Act, if the value of gifts received is less than Rs 50,000, then it is exempt from tax.

If the value of the gift received is more than Rs 50,000, then it is included as income from other sources and taxed as per the income tax rate applicable.

If you gift immovable property to a close relative, such as parents, spouse, siblings, spouse’s siblings, and so on (as specified in the Income Tax Act), it is entirely exempt when you receive the gift.

However, when you sell the immovable property that you were gifted, then you have to pay income tax on capital gains as per the applicable rates.

For example, if you own the immovable property that was gifted for less than 3 years, the short-term capital gain is added to your income on which you will pay tax.

If you own it for more than 3 years, then the long-term capital gain is calculated at the rate of 20%. (in case of long-term capital gain, the cost of indexation is allowed).

After selling the property, if you invest the proceeds in buying another residential house or in capital gains bonds of Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI), you don’t have to pay tax on the capital gains.

Also, it is assumed that the donor acquired the property with income on which he has already paid income tax.

What Is the Cancellation of the Gift Deed?

The gifts furnished nevertheless can be revocable or non-revocable. In case of cancellation of the gift deed, the contributor is reckoned to make a draft of the legal document. The contributor in his possession can keep this document until he/she feels the right moment for the beneficiary to obtain the gift.

As we walk you through the gift deed process, there are certain advantages and disadvantages associated with it. A gift deed can be performed as a “will” during the entire life span and can be transferred after the death of the contributor. For the gift deed to be legalised, it needs to be registered. When an act is registered, it is considered to be a completely legal document, but as for a “Will,” it may be prone to litigation.

Although it is not mandatory to create a gift deed while the transfer of the property, it does assist in filing an accurate documentary record of the contribution and possession. Explore more about registration and stamp duty on the transfer of property and make informed decisions.