All you need to know about gifting property

 All you need to know about gifting property

   If you are planning to gift property to your loved ones, then do it now.  We discuss the implications of gifting immovable property to your near and dear ones

If gifting a home or a piece of land has been at the top of your mind then don’t hold back.  And to make your life easier, here, we tell you how to make the gifting experience a smooth and seamless one.

How property is gifted

Any immovable property - a house or plot of land - can be gifted legally.  The person gifting the property is known as the donor and the one receiving the gift is known as the donee.  For the gift of property to be legally valid, the property should be gifted and accepted during the lifetime of both the donor and the donee.

What is a gift deed?

The gifting of property is clearly defined under section 122 of the Transfer Of Property Act, 1882, where any immovable property, such as real estate, can be transferred through a gift deed.  A gift deed is similar to a sale deed except that no money is paid in the transfer of the property, whether it’s a built house or land.

Contents of a gift deed

A typical gift deed must contain the following:

The names, addresses, and relationship of the donor and donee;

The complete description and details of the house or land that is being gifted should be mentioned clearly;

The gift deed should specify that the donor is the complete and bona fide owner of the property that is being gifted and property exists in entirety;

The donor should explicitly mention the intention to transfer the possession of the property that is being gifted to the donee;

The donor should also indicate that they are transferring the property - gifting it actually - only out of love and affection towards the donee, and no other selfish interest, monetary consideration, or transaction of any type is involved;

It is important for the donor to clearly specify in the gift deed that ownership of the gifted property is being transferred voluntarily and freely to the donee, and the donor is gifting the property without any threat, fear, blackmail or coercion;

The gift deed should clearly state the rights of the donee regarding the gifted property.  A donee’s rights include the right to enjoy the property peacefully and to sell, mortgage, or lease the property whenever they choose to;

In the gift deed, it is important to mention that the donee accepts the gift of property.

Registration of the gift deed

A gift deed is required to be signed by the donor and the donee in the presence of two witnesses, following which the gift deed is registered.  You must remember that it is mandatory for the gift deed to be registered with the sub-registrar office under section 17 of the Registration, Act, 1908, and as per section 123 of the Transfer Of Property Act, 1882.  Your gift contract would be considered invalid if it is not registered legally.

A nominal registration fee is required to be paid along with the submission of the gift deed,  purchase agreement with Index II of the property, society registration certificate, and Aadhar and PAN cards of both parties.

Stamp duty

A gift deed is liable for a stamp duty on it and this fee varies from state to state.  If the property is gifted to a close relative, a lower stamp duty is applicable, compared to the normal transfer of property to another person.  The two percent stamp duty in Maharashtra for gift deed of residential and agricultural properties is between husband, wife, son, daughter, grandson, granddaughter, or wife of deceased son and includes a local body tax (LBT) of one percent and metro cess of one percent.  So the total stamp duty will be this two percent plus Rs 500 with the registration fee of Rs 1,000.  For other relatives, it is three percent plus one percent LBT and one percent metro cess i.e., a total of five percent plus registration fees of Rs 1,000 as per Article 34 of the Maharashtra Stamp Act, amended in 2017.

Taxation on gift

Any gift, including property of any type, is not taxable under section 56 (2) (vii) of the Income-tax Act, 1961, if it is received by an individual or Hindu undivided family from a blood relative, as inheritance, as a wedding gift or in contemplation of death.  On the other hand, if the aggregate of gifts received under other circumstances besides these exceeds Rs 50,000 in a year, then the gift becomes taxable.