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This article has been written by Nihar Ranjan Das, pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

As the name says, it is a gift which shall generally involve the transfer of ownership of a property, which may be in the form of a moveable or immoveable, and shall be delivered by one person to the other. Such transactions shall be recorded in a Deed or in a legal document, which shall be executed between the Donor (the person who will deliver the Gift) and the Donee (the Person who will accept the Gift). Most importantly such transfer must be made voluntarily, without any compensation or consideration in monetary value.

If we try to understand the same in a legal way:  it is a transfer of any property by way of a gift and the same shall be executed by a registered document, signed by or on behalf of the person, who will be gifting the property and the person who will receive the gift and also the same shall be attested by at least two witnesses.

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Provisions as per ‘The Transfer of Property Act, 1882’

Definition as per the Act

As per Sec-122 of the Act, “Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the “Donor”, to another, called the “Donee”, and accepted by or on behalf of the donee.

Acceptance

Acceptance of the Gift is a very essential requirement and such Acceptance must be made during the lifetime of the Donor and in a situation where he/she is capable of doing so. Once a valid gift is accepted, it can’t be cancelled straight away, unless it is a conditional gift. 

There are also some important provisions in the Act, as follows:

  • If at any instances the Donee dies before the acceptance, the gift shall become void.
  • As per the Indian Contract Act, 1872 Minors are not eligible to institute a contract, so they are not allowed to transfer the property as well. So it promptly clarified that, where a Minor is the donor, the gift deed is illegal and void.
  • However, a minor can be eligible to be a donee, a legal guardian must act on behalf of the minor.
  • If a gift deed is conditional, all such conditions have to be made before or at the time of making the deed. It can’t be added later in any manner. But if in any case, a conditional gift in which the donor has complete control over the condition, shall be void, as because the condition must not be immoral or illegal.

Essential Key Elements

There are some essential key elements to make a gift deed valid:

  1. The Donor shall transfer the ownership to the Donee;
  2. The property which must be transferable as per the Sec-5 of the Transfer of Property Act, 1882;
  3. The transfer must be done without any compensation or consideration in monetary value.
  4. Also such transfer must be made voluntarily, with the free consent of the Donor;
  5. The acceptance must be made during the lifetime of the Donor and while he is still capable of giving.
  6. A gift that is made shall be of any specific movable or immovable property, that must be in existence while transferring the same;
  7. The gift must be tangible;
  8. Delivery of possession shall be the important aspect of transfer of the gifted property;
  9. If at any situation the Donee dies before the acceptance, it shall become void.

Transfer How to be effected

In case of immovable property, for the purpose of making a gift, the transfer must be done by a registered instrument and the same shall be signed by or on behalf of the Donor and Donee and also attested by at least two witnesses. The registration shall also be duly stamped and all other official registration formalities. 

As per the Sec-17 of the Registration Act, 1908 it makes it mandatory to register a gift deed with the District Sub-Registrar. If at any case the gift deed is not registered, then the transfer of property shall not be valid. Upon registration of the gift deed in favour of the Donee, he/she shall be able to apply for the mutation of the property.

Procedure for Gift Deed Registration

In pursuance with the Registration Act, 1908, these are the steps to follow while registering a Gift Deed:

  1. First, the property which is to be gifted shall be valued by an approved valuation expert at the office of Sub-Registrar;
  2. The Donor and the Donee shall both sign in the Gift Deed in the presence of minimum 2 witnesses;
  3. Then the signed gift deed shall be submitted in the District Sub-Registrar which shall come within the jurisdiction of the gifted property;
  4. Engage a Lawyer to calculate the registration charges, which shall include the stamp duty and other charges;
  5. Pay the stamp duty and other registration charges as per the valuation;
  6. Finally, get the gift deed attested.

As it is understood that, an unregistered gift is not admissible in evidence and it shall not pass any title to the other. In order to register, the value of the stamp duty may vary from state to state and for women, the stamp duty is slightly lower in some of the states. The table below shows the applicable charges on gift deed in various states:

STATE/UT

Registration Charges

Delhi

For Men: 4%

For Women: 6%

Maharashtra

For Stamp Duty: Rs. 200/-

For Registration: Rs. 200/-

West Bengal

For the transfer to a non-family member

For the transfer to a family member

For Panchayat area 5% of the property’s market value

For Municipal area 6% of the property’s market value

0.5% of the market value

Odisha

For Panchayat area 3% of the property’s market value

For Municipal area 5% of the property’s market value

Uttar Pradesh

2% of the Market value of the property

Karnataka

For the transfer to a non-family member

For the transfer to a family member

5% on the market value of the property

Rs.1000 and fixed registration fee of Rs.500

Andhra Pradesh

Stamp Duty: 2% of the market value of the property

Registration Fee: 0.5% of the market value of the property

Tamilnadu

Stamp Duty: 7% of the market value of the property

Registration Fee: 1% of the market value of the property

Madhya Pradesh

For the transfer to a non-family member

For the transfer to a family member

Stamp Duty: 5% of the market value of the property

2.5% of the market value of the property

Telangana

Registration Fee: 1% of the market value of the property

Registration Fee: 0.5% of the market value of the property

Rajasthan

Stamp Duty: 6% of the market value of the property

Registration Fee: 1% of the market value of the property

Income tax on Gift Deed

As per the Income Tax laws in India, the value of the gifts received by a Donee in a financial year is fully exempted, as long as the total valuation of such gift is not exceeding Rs. 50,000/-If the valuation exceeds 50,000/-, then it will become taxable without any threshold exemption.

However, if a gift of any movable or immovable property is between two close relatives, it shall be fully exempted from tax, without any upper limit. It is also specified in the list of close relatives, which includes parents, siblings, spouse, siblings of the spouse, lineal ascendants and descendants of any person and his/her spouse. It shall also include the spouse of the above-listed persons. 

Is it possible to suspend or revoke a Gift Deed?

Yes, it is possible, but such conditions must be considered and included promptly in the registered Gift Deed. As per the Sec-126 of the Transfer of Property Act, 1882 revoking the gift deed shall not be possible, unless the Donor specifies the same in the registered contract that he/she wants to keep with himself such right to take back the gift at any point of time. So in pursuance with the sec-126 of the Act, it specifies two way of revocation of a gift:

  1. Revocation by mutual agreement between the Donor and Donee;
  2. Revocation by rescission as a contract.

Revocation by mutual agreement

As per the mutual understanding between the Donor and the Donee, that the gift shall be suspended upon happening of any event which is not the will of the Donor. It must be expressly specified that, upon non-fulfilment of such condition, the Donor may revoke the gift deed.

However, if any condition which is not specified in the Gift Deed but has been provided or mentioned in a separate form of the mutual agreement but it must be a part of the transaction of the gift, in such scenario the condition shall be valid and enforceable.

Also, a gift deed shall not be merely cancelled if the same was not based on fraud or misrepresentation, undue influence or was an onerous one. A person can’t cancel the same unilaterally. It must be challenged in the competent court of law. But the person who will try to challenge the Gift Deed must have to establish that the execution of the deed was not acknowledged by the Donor and it was executed under misrepresentation and fraud etc. 

Example:

A makes a gift of Rs. 10 Lakh in favour of B and from that “A” reserves 1Lakh for himself with B’s assent to take it back at his pleasure from that total amount. The gift as to Rs. 9 Lakh is valid but as regard Rs. 1 Lakh the gift is void. It shall only continue to belong to A. It shall be considered by Law that no transfer of Rs. 1 Lakh was made at all.

Revocation by rescission as contract

A gift is a transfer made voluntarily. If it proved that the gift was not made voluntarily and the consent of the Donor was not free, the gift must be revoked. In a simpler term gift must be an express or implied contract, in which an offer made by the Donor and the acceptance by the Donee. If the contract itself is rescinded or revoked, there is no question of taking place of the transfer of gift made under it.

As per Sec-126 of the Transfer of Property Act, 1882:- “A gift may also be revoked in the cases in which it might be rescinded if it were a contract”. Also as per the Sec-19 of the Indian Contract Act says that “where consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is voidable as the consent of party was obtained. So it clearly suggests that, if the gift is not made voluntarily because of any above-mentioned fact, it may be revoked by the Donor.

Conclusion

The concept and the subject matter of the gift have been age-old and it was a distinct facet in the Property Law.  Then all the rules, regulation and procedure regarding the Gift lay down in the Transfer of Property Act, 1882. There are certain essentials of a gift like: it is a transfer of certain existing moveable or immoveable property made voluntarily and without consideration. It must transfer the ownership of the property, must have been made voluntarily, the donor must be competent and legally eligible to make the transfer and the transferee must accept that transaction and if the donee dies before the acceptance, the gift becomes void.

Also, for the purpose of making a gift, the transfer must be done by a registered instrument and the same shall be signed by or on behalf of the Donor and Donee and also attested by at least two witnesses. The registration shall also be duly stamped and all other official registration formalities. 

And finally, a deed of the gift once executed and registered, can’t be revoked unless the fulfilment of mandatory requirement as per the Sec-126 of the Transfer of Property Act, 1882. So it can be concluded by stating that, the Transfer of Property Act, 1882 and its sections is a complete code which deals with the regulation of gift in India. Sec- 126 of the Act is so transparent about the suspension or revocation of the gift and in which manner it can be done. 

References

https://blog.ipleaders.in/concept-of-gift-under-the-transfer-of-property-act-1882/amp/ 

http://docs.manupatra.in/newsline/articles/Upload/541112EC-983D-422F-88C8-37D4082AEDD6.pdf


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