How To Transfer Your House Or Property Through Gift Deed? All You Need To Know

Learn how to use a gift deed to transfer your movable and immovable property as well as the best ways to reduce the likelihood of conflicts while transferring your house to a loved one through a gift deed, is a must.

The Transfer of Property Act of 1882 governs the process of gifting property. A gift deed is a legal document or instrument that enables one person to freely transfer any real estate, whether it be movable or immovable, to another without receiving any monetary compensation. The recipient of the gift is referred to as the ‘donee,’ while the giver is referred to as the ‘donor.’

Can I Use a Gift Deed to Transfer My House?

The short answer is yes. Even though a will is one of the most well-known ways to transfer your property to your legal successors, a gift deed can also help you accomplish the same outcome with fewer hurdles in the way. You may transfer your property to whoever you choose using a gift deed, but there are certain things you should know before.

Conditions for Gifting an Immovable Property

Immovable property gifts must be accepted by the donee while the donor is still alive, failing which the gift will be deemed void. If the property is to be regarded as a gift, Section 122 of the Property Transfer Act 1882 requires that it be recorded with the sub-registrar. It will need to pay stamp duty and registration fees, which vary between states, just like any other property transfer. Additionally, the donor needs to be qualified and not a minor.

Moreover, a gift deed should contain all pertinent information about the donor, donee, and property being transferred. It ought to also include their signatures and contact information, as well as the signatures of two witnesses who were present at the time of the property transfer. Remember that it is always better to have a lawyer prepare the gift deed and have the transfer process carried out in the presence of a legal professional.

Gift Deed Cancellation/Revocation

A gift deed is quite often difficult to withdraw or cancel after it has been made. Revocation is only possible if the deed specifies the proper conditions for revocation or has an adequate revocation clause.

Only when the donor and donee agree, when the transfer was made solely in the transferor's will and the recipient refused to accept it, when the gift deed was illegally drafted through coercion or fraud, or when the reasons it was made were immoral or illegitimate, can a gift deed be cancelled or revoked.

Tax Liability of a Gift Deed

In accordance with Section 56(2) of the Income Tax Act, gifts that total more than ₹50,000 must be taxed in the donee's hands under income from other sources. The immovable property will be subject to taxation if the stamp duty value reaches ₹50,000.

Do note that a gift will only be exempt from tax if it is received from certain family members, on the occasion of a wedding, as an inheritance or through a will, in anticipation of the donor's passing, from a local authority, from a fund, foundation, university, educational institution, hospital, or medical institution, or if it is received from a trust or institution mentioned in Section 10(23C), or if it is received from a trust or institution registered as per Section 12AA or 12AB.

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Tax Liability of a Gift Deed

Depending on the city, a gift deed will be subject to stamp duty after it is formed (some states exempt this charge in case of transfer to an heir). In Maharashtra, there is a 5% property tax while in Karnataka, there is a 2 per cent tax being levied. Do note that you will only be required to pay stamp duty on the portion of the property you are giving away. Once stamp duty has been paid, the deed must be registered. The majority of states levy 1 per cent registration fees. The ceiling in Bangalore is ₹30,000.

Vakilsearch experts can help you with gift deed registration and help you transfer your house to a loved one. When done right gift deeds offer the utmost legal protection on property transfers. If you wish to know more about the stamp duty on gift deeds in blood relations get in touch with the experts at Vakilsearch today!

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