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Know Various Aspects About The Gift Deed & Stamp Duty

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When a person provides a gift to someone, there is a set of legal rules, methods & procedures which is required to be followed. So, it is important to comprehend the legal aspects involved in this procedure. Or else, if you don’t follow the due rules and procedures, it is likely that your gift may get invalidated.

One aspect of this procedure is the payment of stamp duty. This is a significant step towards claiming the ownership of the gifted property.

The Definition Of A Gift Deed

A gift deed is defined as a legal document that provides the details of the voluntary transfer of a gift from the donor (that is one who owns the property) to the donee (that is one who receives the gift) without there being any compensation or favour The gift deed can be there for either of them, movable goods as well as immovable goods like a house.

A gift deed involving an immovable property is about gifting an immovable property say a house or asset. On similar lines, a gift deed that is concerned with a movable property deals with gifting something movable like a car or cash. A gift deed gives all the details of the gift, all that is needed by the law.  

Also, read What is the Electricity (Amendment) Bill 2022?

The Characteristics & Attributes Of A Gift  

The Ownership Transfer: For an authentic and proper gift, it is necessary that there should take place a full transfer of rights from the doner to the donee.  In case, transfer of ownership is not there, a gift would be invalid.

The Existing Property: A gift can only be a movable or immovable property that is existing today. This implies that a gift that will come to exist in the future cannot be made. Thus an individual can give his/her share of the property, etc which he/she has obtained after the partition of the joint family property.

The Aspect Of No Consideration: The implication of consideration is monetary consideration. It does not imply love & affection. The important cost factor aspect of the gift is that the donor does not take any monetary benefit or consideration from the donee in return for the gifted property. If there is any consideration as a part of the situation, then it is a sale and not a gift.

There Is Free Consent: The transfer of ownership of the property should be voluntary and the consent of the donor should be free and not under any influence, force, or fraud. In case, a gift is being made to be provided under a coercion, then it is not a valid gift.

The Capacity Of The Donor: The donor should have attained majority that is he/she should be at least 18 years in age and should be of a sound mind. He/she should have the capacity to contract and should not be disqualified due to any other reason. Then alone it can be considered a valid Gift transfer.

The Gift Acceptance:  Also, the donee should accept the gift himself/herself. Besides, it is also significant that the gift should be accepted, by the donee during the lifetime of the donor, until when he/she has the capacity to give.   

Attributes & Characteristics Of A Gift Deed

Donor or any other person on his/her behalf should sign the gift deed Either the donor should sign himself/herself or he/she should authorize someone else to do the same. Besides, the witness who attests should also sign the document in the presence of the donor.

Two witnesses must sign the gift deed

The gift deed must be signed by the donor or any other person on his/her behalf in the presence of two attesting witnesses. It is not mandatory that the two witnesses attest the document at same time.

There should be proper stamping of the gift deed: It is important to give proper and full stamp duty in order to authenticate a gift deed.

Proper registration of a gift deed: The registration of the gift deed of the immovable property is governed by the Section 17 of the Registration Act, 1908.  This registration should be done before the Registration Authority after paying the registration fees. As for the registration of movable property gift deed, it is just optional.

Stamp Duty on Gift Deed:

What is Stamp Duty?

Stamp duty, in common parlance, stands for a tax put up by the government whenever there is transaction of property. In the levying of stamp duty, a physical stamp is attached onto the legal document which denotes that tax has been paid during the transaction of the property.

On the gifting of a property, a mere physical possession is not enough. You should also have some legal evidence about the ownership of the property. This legal evidence comes in by the paying of registration charges and stamp duty.

Why Do We Have To Pay Stamp Duty?

The stamp duty is collected by the state government during the property registration. This payment authenticates the transfer agreement. When a stamp is put on the gift deed while transferring the property, it becomes a legal document that establishes your ownership in the court. If you don’t pay the stamp duty, you may not claim a gifted property as your own. Therefore, it is very significant to make the full payment of stamp duty, in order to claim the ownership.

Is The Gift Deed Taxable ?

The stamp duty is collected by the state government during the process of registration of property. No tax/stamp duty is to be paid on gifts (of cash or kind) until the value of the gift does not exceed Rs 50,000 in a year.  But in case, the total amount exceeds Rs 50,000, then tax is to be paid. Any amount received from specified relatives is totally tax-free in the hands of recipient.

Suppose you wish to buy a house, and your father/mother/sister/brother etc make a transfer of Rs 20 lakh to your (bank) account. You need not to worry about taxation as it is a gift from your relative and you need not pay any tax. Besides, cash gift deed between blood relatives is non-taxable.

The Factors That Affect Stamp Duty In India 

Well, the stamp duty differs from state to state. But, there are some factors which, directly & indirectly decide the amount of stamp duty to be paid by any person. They are enumerated as under:

Geographic location - Stamp duty rates vary from one place to another. For instance, suppose your property is situated in a municipal area, you may have to pay a higher rate than if it is located in a rural area.

How old is the building- Well, the stamp duty rates are measured as a part of the complete market value of the property. Thus, how old is the property also plays a crucial role. The buildings, which are old usually invite less stamp duty charges when compared to new buildings. The reason is obvious: market values of old buildings have depreciated more.

How old is the owner – The vast majority of the state governments in India have subsidized stamp duty charges for senior citizens. Thus, the owner’s age plays a significant role in deciding the charge.

Owner’s Gender – Similar to the senior citizens, women too enjoy a concession on stamp duty rate in case the property is in the woman’s name.

The Purpose of providing the gift – Residential buildings invite lesser stamp duty when compared with commercial buildings. This is so because in commercial buildings we need more amenities, etc. 

How can we pay Stamp Duty in India?

We can pay stamp duty charges to the respective state government in the following three ways -:

Using Stamp Paper – If we pay directly to the registered authority, it is a traditional method of doing a transaction on non-judicial stamp papers. In this, the two parties ought to write down the terms of the agreement on paper and get it signed.

E - Stamping or Electronic Stamping – In order to make stamping easy and to avoid counterfeit stamp papers, the government has introduced e-stamping which means stamping done online. It is an easier way to pay stamp duty. To do e-stamping, you will need to visit SHCIL (Stock Holding Corporation of India Limited) website.

Franking-This is another process. Herein, we pay stamp duty to the authorized banks that have a franking center. In this process, you need to prepare the documents first. Thereafter, you can give it to the authorized center or bank which accepts the payment of stamp duty. The bank will physically stamp the paper to make it legally existent.

Also read Energy conservation amendment bill, All you need to know


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