Gift Deed

Going by its dictionary meaning, a deed, also known and understood as evidence in ancient times, is nothing but a legal document and its role is to affirm and confirm an interest or right on the mentioned subject, mainly movable or immovable property and as a general practice, a deed must meet below mentioned requirements, such as:

  1. It must mention the word “Deed” categorically in order to mention it in face that it is nothing else, but a deed.
  2. It must mention that the document is an instrument in extending the privilege or thing to the nominee.
  3. Donor or the grantor must be in legal capacity to grant to gift the mentioned privilege or gift and the grantee or the nominee must be in a legal capacity to accept the same. Also the grantee should have agreed to accept the gift or the thing or the privilege in order for the deed to be executed.
  4. The deed must mention and indicate presence of sufficient witness i.e. for any deed be executed, a prescribed no of witnesses need to be present. It is also known as being in solemn form.
  5. Since a deed is a legal document, it must contain the seal of the concerned department. However, it might not be required under certain jurisdictions.
Draft A Gift Deed - What Can Be Gifted, Procedure For Registration, Format

A gift deed, as mentioned above, is a signed legal document that mentions a voluntarily transfer of ownership of real, personal or intellectual property, from one person or institution to another, provided both the grantor and the grantee are in legal capacity to grant and accept the same. As a human being, to gift something to our near and dear ones is like a second nature to us and while it is definitely a good practice to have, most of us don’t even know if there is a legal side of the same i.e. any gift that you make has certain legal implications to it and it is important to understand the same. Also the experts believe that drafting a gift deed scores higher than drafting your will and give following points to validate the same:

  1. While a Will is applicable only after the death of its executor, a gift deed is executed during the lifetime of the owner and if the legal acceptance of donee is available, then the transfer happens immediately.
  2. A Will is much prone to litigation as compared to a gift deed. Also the later is effective only when it is registered.
  3. Any kind of transfer mentioned in the gift deed between the donor and the donee are tax free as per the Section 56(2)(vii) of the Income Tax i.e. if an individual or member of a Hindu Undivided Family (HUF) receives a gift from a blood relative or as inheritance or at the time of marriage or in contemplation of death, is exempted from tax.
  4. While a Will can be changed as many times as you want, a gift deed is normally irrevocable i.e. it cannot be changed once it is executed.
  5. A gift deed attracts no extra cost in the form of a stamp duty, which varies from state to state.

As per the Transfer of Property Act 1882, a gift deed is described as transfer of a movable or immovable property in the form of a gift. Section 122 of the Transfer of Property Act 1882 lays special emphasis on the manner of transfer of the gift or the privilege i.e. the mentioned or desired transfer should be done voluntarily and without any coercion or duress and has no other ground of consideration other than natural love and affection for the grantee. The above mentioned act views the person making the voluntary transfer of the thing or the privilege as a donor and the person accepting the same as the donee. Donor and donee are also referred as grantor and grantee.

Although drafting a gift deed is not mandatory or compulsory, but it does give legal touch to your action i.e. it creates a documentary record and one can gift anything, movable or immovable if it has below mentioned properties:

  1. One of the most important factors that need be considered is that the donor should be solvent.
  2. The gift must be transferable.
  3. It should be existing in real in present and is not imaginary i.e. it should not be a future property.
  4. It should be tangible.
  5. It must be well defined either as a movable or immovable property.
  6. It has got acceptance of the donee.
  7. It is just a gift, without any consideration, other than natural love and affection.

Important Aspects of Gift Deed of Property

Gift of a thing or privilege has three important aspects attached to it, as mentioned below:

Acceptance of the Donee

Before the gift deed is drafted and executed, it is important to consider if the donee is in agreement with the gift given to him/her or not. While it is normally assumed to be in affirmation with the gift, it is not the case always because the gift deed will be considered invalid if the donee fails to accept the same. Thus, acceptance of the donee is both mandatory as well as legal requirement in order to execute a gift deed.

Drafting the Gift Deed

Considering the fact that a gift deed is a legal document, it is drafted with the help of a lawyer and mentioned all relevant details. It is important to not to miss out on every small and big details for the deed to be self-sufficient.

Registration of the Gift Deed

As per the Section 123 of the Transfer of Property Act 1882, a donee cannot get the possession of the thing or the privilege mentioned in the gift deed unless it is registered. Also it is required to have attestation at least by two witnesses in order to validate the gift deed.

How to Draft a Gift Deed?

While drafting a gift deed, the lawyer must mention all the relevant details concerning the gift and following are the things which must go in a properly drafted Gift Deed:

  1. Absolute absence of consideration: A gift need should mention in categorically that the gift or the transfer is being made without any consideration other than the natural love and affection and in case a consideration of any other type is found, the transfer shall cease to be gift.
  2. No coercion: As mentioned above, a gift deed must mention it in face that the transfer of the gift is being done voluntarily and without any duress or coercion and also that the donor is fully aware of the consequences of the transfer he is executing in the form of gift.
  3. Donor i.e. the owner of the property: Only the actual donor of the property can make the transfer because of the simple logic i.e. you cannot gift something you don’t own and thus the person who is executing the gift deed should be the one paying taxes and in current possession of the property.
  4. Description of the property: A detailed description of the property is a must have while drafting a gift deed and it should have details such as area, built-up area, address, location of the property, How old or new the property is etc.
  5. Additional rights: While drafting a gift deed, the advocate should mention all kind of rights, liabilities in relation with the property.
  6. Relationship between the donor and the donee: This makes an important part of a gift deed because as mentioned above, a gift deed executed between blood relatives and members of a Hindu Undivided Family is exempted from any kind of tax on the same.
  7. Donee’s rights: For a gift deed to be in order, it is important for the lawyer to exhaustively mention the rights of the donee on the mentioned gift i.e. it should mention how he is supposed to possess, occupy and enjoy the gift given to him. Also it must mention categorically if the donee has the right to put it on rent or profit and have the right to use it for his personal use.
  8. Delivery of possession: A properly executed gift deed should mention the acts need to be taken for the delivery of possession to the donee i.e. the donor need to ensure that the mentioned property is vacant at the time deed is executed and also the transfer of the possession is done in a peaceful manner. Also the former need to ensure that there are no pending liabilities such as tax or renovation fees, or penalties, if any, on the mentioned gift.
  9. Stamp duty assessment: It is important to ascertain the value of the gift i.e. the property for the purpose of ad valorem stamp duty.
  10. Witnesses: As per the Transfer of Property Act 1882, a gift deed needs to be executed in the presence of at least two witnesses, for it to be considered legal and valid.

Stamp Duty on Gift Deed

Gifting of house property is subject to certain income tax and stamp duty payments.

Gift Deed Format

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Download Gift Deed Format

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