WHAT IS GIFT DEED?
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=There are various ways through which you can transfer a property that you own. It could be by way of sale, Will or gift. A commonly used method, especially when transferring to a family member or friend, is executing a gift deed in favour of the recipient. Though no monetary transaction is involved, it is still necessary to register the gift deed to make the transfer valid.
Transfer of property by GIFT DEED
There are a number of ways through which the property can be transferred from the owner of that property to the donee. It can be done by sale, will or gift but the method commonly used to transfer the property to the family members is by executing the gift deed in favor of that person.
Though no monetary transaction is involved in the gift deed then also it is mandatory to get the gift deed registered.
Section 122 of the Transfer of Property Act, 1882 defines gift.
WHAT ALL CAN BE GIFTED?
Things which can be gifted should have such properties to be called as a gift –
1. It should be movable or immovable property.
2. It should be tangible property.
3. It must be transferable.
4. It should be in present time and not to be a future property.
With the help of the lawyer, gift deed is drafted. It is basically a contract between the donor and the donee which defines the simultaneous act of giving and taking. To make gift valid, it must be made by the person voluntarily and not by force.
After the legal work is done it is necessary by the donee to accept the gift from the donor in order to make the gift deed valid. Acceptance of the gift must be done during the lifetime of the donor. In case donee fails to accept the gift, whatever may be the reasons, it is rendered invalid.
A gift of immovable property cannot pass any title unless it is registered under Section 123 of the transfer of property act. Attestation by two witnesses is mandatory during registration as well as post registration then only title transfer is possible.
Stamp duty must be paid on the gift deed and the same must be registered. The registration charges payable on a gift deed differs from state to state. In certain states, it is a percentage with a cap, and in other states it is an amount with no cap. It would be advisable for you to check with a local lawyer as to what the registration fee would be on the gift deed in your state.
GIFT DEED IN CASE OF MINOR
Any person who owns the property can make the gift deed in favor of anyone but there is an exception to this rule.
In the cases in which either a donee or donor is a minor, minors are not eligible to contract so, they cannot transfer property as a gift.
• If the donor is a minor then the gift deed becomes invalid.
• In case, if the donee is a minor, a natural guardian can accept the gift on behalf of the minor.
Guardian acts as a manager of the property gifted to the minor and if the gift is burdensome, the responsibility of the gift cannot be enforced on the minor until he/she is minor. Once the donee becomes major he may either accept the gift or return the gift back to the donor.
TAX IMPLICATIONS IN A GIFT DEED
The biggest benefit is that there is no tax implication if you are gifting property to certain relatives.
CERTAIN THINGS WHICH SHOULD BE REMEMBERED WHILE MAKING GIFT DEED
While executing the gift deed one thing should be remembered that, after executing the gift deed in favor of the donee, the donor does not have the right to revoke the gift deed until there is a special clause mentioning to revoke the gift, which has been made in the favor of donee.
Note that:- Though a gift deed cannot be revoked, it can be challenged in court, coercion and fraud being the most common grounds. So, if you have been tricked into gifting property, you can take the matter to court and have the transfer reversed. It can also be challenged on the grounds that the donor was not of sound mind or was a minor. You can never have a challenge-free gift deed, but consult a lawyer while drafting it so that the chances of it being challenged are minimum.