Gift deed is a legal document where a donor voluntarily transfers his assets to the donee. Assets may be property or properties or even money, which are transferred or given as a gift to the donee without any pecuniary (money) interest from the donee. The person making the gift must be solvent, and he must not make such gifts with the intentions of making any illegal gains or for evading tax.
Donor and Donee
Donor is the owner of the property and Donee is the receiver of the gift.
Requirements for a gift to be legally effective
- Intention of the donor (which has to be donation),
- Delivery of gift to the donee,
- Acceptance of the gift by the donee.
- Registration of a gift of an immovable property is necessary as according to section 123 of Transfer of property act, gift of an immovable property cannot pass any title to the donee, unless it is registered.
Who can make such gift deeds?
Usually, these type of gift deeds are made by family members or relatives or any other next of kin.
Can a gift deed be revoked?
A gift cannot be revoked. Once the donor has gifted the Property or the gift to the donee, there is no way that he can ask for the return of the same, as it is not legal. The unilateral cancellation of a valid gift is invalid. There are however certain grounds, permitted by the law in which gifts can be revoked.
Can a gifted property be cancelled?
No, A gifted property can only be cancelled by the procedure of the Court. In this circumstance, the donor has to prove that the said gifted property was taken by fraud or misrepresentation from him. The donor has to contest the matter in the court or any of his next of kin can contest on behalf of him, who thinks that he has an interest in that property.
Types of gifts
- Inter vivos– these gifts were donated during the donor’s lifetime and consists of interests of present or future.
- Causa mortis – These are deathbed gifts, which is a future gift made with the anticipation of the donor’s death. This type of gift is not valid unless the donor dies of the impending sickness, predicting which he had made the gift.
- Outright - These types of gifts are made free of any restrictions.
- Onerous – Made with the burden or obligation imposed on the donee.
- Remunerative – Made to compensate for services delivered.
Taxation on gifts
Earlier, in India a gift tax act used to exist, which required tax to be paid on the amount of the gift. This act has now been abolished and in the Financial year 2004-05, a new provision pertaining to gift tax has been included in the Income tax (1961) act under section 56 (2). According to this act gift received by an individual or a Hindu undivided family from relatives, an inheritance, in marriage, or in contemplation of death will not be taxable. In all other scenarios gift received whose amount exceeds 50000 Indian rupees will be taxable under the head income from other sources.
Pros and cons of gift deeds
Pros
- A gift deed is executed during the lifetime of the donor and transfer takes place immediately unlike in will which is applicable after the death of the donor.
- Gift deed needs to be registered which makes it less prone to litigation.
- Transfers of gift deeds are tax free for both the donor and the donee.
Cons
- Gift deed is irrevocable after execution.
- Gift deed requires extra cost for stamp duty required in it’s transaction which varies from state to state.
You can get the required gift deeds here -
Click here for movable property
Click here for immovable property