All human beings like to gift something to their relatives and loved ones. Although gifting is common, only few of us understand the legal implications of gifting process. Ideal way of gifting is through gift deeds and this process scores above drafting “Will” in some respect. Read on to find out more about gift deed act and how it scores above “Will” creation.
What is a Gift Deed?
A Gift Deed is a legal document that describes voluntary transfer of gift from donor (owner of property) to donee (receiver of gift) without any exchange of money. The donor must be solvent and should not use this tool for tax evasion and illegal gains.
What can be gifted?
Anything which qualifies as gift must have following properties
- It must be well defined existing movable or immovable property
- It must be transferable
- It should exist today and should not be a future property
- It should be tangible.
Steps in gifting process
Gifting process can be subdivided into three parts as described below:
- Drafting the Gift Deed – A gift deed is drafted with the help of a lawyer and it describes what is being transferred and to whom. Gift Deed is a contract between donor and the donee which defines simultaneous and reciprocal act of giving and taking. A gift to be valid must be made by a person voluntarily and not under compulsion without any exchange of money.
- Acceptance – Acceptance of the gift after its execution is a legal requirement and Donee must accept the gift during the lifetime of donor. In case donee fails to accept the gift, it is rendered invalid. The acceptance may be validated by acts such as taking possession of the property.
- Registration – As per Section 123 of the Transfer of Property Act, a gift of immovable property cannot pass any title to the donee unless it is registered. Attestation by two witnesses is required during registration and post registration, title transfer is possible.
How to register a Gif Deed?
Registration of gift deed is done as per the provisions of the Registration Act, 1908. Common steps involved in registration process are:
- Valuation of property being gifted by an approved valuation expert.
- Payment of Stamp duty and transfer duty – Stamp duty varies for women and men (Slightly lower for women). Stamp duty also varies from state to state and for latest rates one should visit official state government website.
In case of Minor
Legally speaking person who owns the property can make a gift to any other person. An exception to this rule is the case in which either of donor or donee is a minor. Minors are not eligible to contract; therefore they cannot transfer property as a gift. A gift deed in case of donor being a minor is legally not valid.
In case of donee being a minor, a natural guardian can accept a gift on his behalf. Guardian acts as a manager of the gifted property, and if the gift is onerous, the obligation cannot be enforced on donee until he/she is a minor. Once the donee is an adult, he must either accept the burden or return the gift.
Pros and Cons of Gift deed over Will
|1. It is executed during the life time of donor and transfer happens immediately whereas “Will” is applicable after death.|
2. Gift deed needs to be registered; only then it is effective. Registration renders it less liable to litigation. “Will” on the other hand is prone to litigation.
3. Transfer using gift deeds are tax free in the hands of donor and donee.
|1. Gift deed is irrevocable post execution but “Will” can be changed as many times as you want.|
2. There is extra cost in the form of Stamp Duty in case of Gift Deeds. Stamp duty varies from state to state.