Gift deed in India: An Overview
A gift deed is a legal document that transfers the ownership of a property or asset from one person to another without any exchange of money. It is an instrument of transfer of property that is commonly used in India to gift property to family members or close relatives. In this blog, we will discuss the validity and structure of a gift deed in India.
Validity of a gift deed
To be legally valid, a gift deed must fulfill certain legal requirements. These requirements are outlined in the Transfer of Property Act, 1882 and the Indian Registration Act, 1908. The key requirements for a gift deed to be valid are:
Competency of parties
The donor and the donee must be competent to enter into a gift deed. This means that they must be of sound mind, not minors, and should have the legal capacity to transfer and receive property.
The gift must be made by the donor out of his or her free consent. This means that the donor should not be under any undue influence or coercion and should fully understand the implications of the gift.
The gift must be accepted by the donee. Acceptance can be express or implied, but it must be made during the lifetime of the donor.
The gift must be delivered by the donor to the donee. Delivery can be physical, constructive, or symbolic, but it must be unconditional and irrevocable.
The gift deed must be registered with the Sub-Registrar of Assurances in the jurisdiction where the property is located. This is a mandatory requirement under Section 17 of the Indian Registration Act, 1908, and failure to register the gift deed can render it invalid.
Structure of a gift deed
The gift deed must be drafted in a specific format and must contain certain essential elements. These include:
The gift deed should have a clear and concise title that reflects the purpose of the document. This can be "Gift Deed" or "Deed of Gift".
The introduction of the gift deed should include the names and addresses of the donor and the donee, as well as a brief description of the property being gifted.
The recitals of the gift deed should provide the context and background of the gift. This can include the reason for the gift, the relationship between the donor and the donee, and any other relevant details.
d) Operative clause
The operative clause of the gift deed is the section that actually transfers the property from the donor to the donee. This should be clearly worded and should specify the nature and extent of the property being gifted.
The gift deed should explicitly state that no consideration has been exchanged between the donor and the donee. This is a key requirement for a gift deed to be valid, as any exchange of money or other consideration would render the gift deed void.
The covenants of the gift deed are the promises made by the donor and the donee. These can include promises to maintain the property, pay taxes, or otherwise fulfill the obligations associated with ownership of the property.
g) Registration details
The gift deed should include the details of the registration, including the date and time of registration, the Sub-Registrar of Assurances, and the registration number.
Finally, the gift deed should be signed by the donor and the donee, as well as two witnesses. The signatures should be witnessed by an authorized person, and the gift deed should also include the date of signing. In India, a gift deed is a legal way to give someone else your property. It can also help you save money on taxes. If you gift your property to close family members, you don't have to pay tax on it. The law, specifically the Indian Income Tax Act, 1961, has a list of family members you can gift to without paying tax. This list includes your parents, spouse, siblings, kids, and direct ancestors and descendants. If you give your property to any of these family members, it counts as tax-free income. So, using a gift deed can help you save money, especially if your property's value has increased a lot over time. Without a gift deed, if you sell such a property, you might have to pay a lot of money as capital gains tax.