Gifting of assets is transferring possession of one's assets to some other via a gift deed. Awarding a property to someone who is a close relative thru a gift deed involves financial ramifications that perhaps you should examine beforehand. As the term implies, a gift deed is only dependent on the voluntary transfer of ownership and doesn't include money transfer.
Did you know?
The income tax laws state the value of all the gifts received by a person during a year is fully exempt, as long as the total of such gifts does not exceed ₹50,000.
Also Read: Everything You Need to Understand About Filing Returns for Previous Years
What is Gift Deed?
It is just an arrangement one uses when an individual intends to give their property or wealth to another individual. Via gift deed, one can willingly gift the asset from the giver to the decedent. It enables the asset owner to gift the asset to anybody while avoiding any later successor or inheriting rights. A certified gift deed is proof by itself, and it is not like a will. The change of ownership is quick, and you'll never have to attend to a legal proceeding to implement such a gift deed, saving you precious time.
Gift Deed Format in India
The Transfer of Property Act, 1882 ("Act") governs asset transactions as presented in India. Gifting of assets is passing possession of someone's assets to another individual through the execution of such a gift deed. It is a mechanism by which the proprietor of permanent or transportable assets conveys their assets to some other individual as a present without compensation.
One can refer to the individual giving their assets as the giver and the individual receiving the present as the donee. To consider this act as legitimate underneath the law, the giver must freely donate the asset to the donee. And to consider it lawfully legitimate, the donee must take it during the donor's existence.
Whenever an indivdual records the gift deed with the relevant Registry or Sub-Registrar, the grant of real property becomes legal. The grant of moveable property becomes operative whenever they register the gift deed or when the donor gives the asset. Whenever the donor desires to provide an underlying asset to the decedent, one must register the gift.
Clauses in a Gift Deed
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Details of Donor and Donee
In the gift deed, one has to mention the giver and donee's identity, residence, and relationships.
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Consideration
The gift deed must state that perhaps the giver is gifting assets out of love and compassion for the donee, without any other compensation involved in the exchange.
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Voluntary Transfer
The gift deed must state that the giver willingly and deliberately passes possession of the donated asset towards the donee. There should be no intimidation, compulsion or pressure throughout the exchange.
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Ownership of Property
The gift deed must state that the asset exists, that the giver is the registered proprietor of the grant asset and that the giver has given the donee ownership of the gift assets.
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Property Details
They must specify the comprehensive overview of the particular asset in the GD.
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Rights of the Donee
The giver must include the donee's obligations in the gift deed, and it comprises the donee's freedom to quietly use the asset and the ability to sell, refinance or rent the asset.
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Acceptance by Donee
The donee must mention in the gift deed as accepting the grant of the asset.
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Delivery
The gift deed must directly or implicitly state the desire to give ownership of the donated property.
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Witnesses
One should include the eyewitnesses' names and addresses in the donation deed. Both the parties have to sign and witnessed by at least two observers.
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Revocation
There is no requirement for cancellation provision of the gift properties in the gift deed. However, we recommend preventing possible controversy.
Also Read: The Income Tax Act, Section 206AB
Gift Deed Format
Below is the gift deed format.
Parties in a Gift Deed
A gift deed involves two parties: the giver and the recipient. The individual gifting the assets is a donor, and the individual receiving the asset is the donee. In creating the donation, the giver must be of stable mind and capable of participating in contracts. A juvenile cannot donate property since they are unable to engage in contracts. On the other hand, a minor's guardians can receive presents on their own. The giver should give presents without expectation of reward; that is giver must not obtain anything in return for giving the gift.
Properties Gifted Through a Gift Deed
The donor might provide both permanent and moveable property to the donee as a grant. The unmovable property includes territory or any advantage derived from lands or whatever connects to the soil but excludes crop cultivation, lying wood and grasses. Immobile assets can refer them as mobile assets. Nevertheless, the giver could only donate assets that currently exist the gift deed is registered. They cannot give away property they expect or will receive in the latter. The owner can give it as a gift only when the assets are legally in the giver's name. At the moment of the donation, the giver should own the asset of the present.
Registration of Gift Deed
The gift of real assets is legal as per Section 123 of the Transfer of Property Act of 1882, signed by both donor and receiver and two eyewitnesses. When given underneath a certified gift deed or through handing the asset to the decedent, the present of moveable property is lawful.
The lawyer has to write the gift deed on stamp paper and include the entire provisions specified above to register. The giver and recipient require signing across all parts of the GD, and at least two witnesses must sign it. The recipient must agree to the offer during the donor's existence and while the giver is mentally competent.
The price of the promissory note used to perform the gift deed might change depending on the region. The stamping papers one has to submit with the Registrar or Sub-office Registrar's office in the authority of the asset donation. If the asset is moveable, the Registrar or Sub-office Registrar has authority over the donor's residence.
What are the Documents Required for a Gift Deed?
As well as the above documents, you will also need to provide the original gift deed, an ID card, a PAN card, an Aadhaar card, as well as any other documents pertaining to the property.
Tax Implications of Gift Deed
From April 1, 2017, presents are taxable as per Section 56(2)(x) of the Income Tax Act of 1961. Whenever an individual receives a quantity of cash over ₹50,000 without regard as a present, the entire amount is chargeable to tax on donee underneath the heading 'Additional income', according to Section 56(2)(x)(a).
Whenever an individual receives an unmovable property without regarding it as a present as well as the stamp duty worth of the grant surpasses₹50,000, the stamp duty price of the asset is chargeable to tax on the donee, according to Section 56(2)(x)(b).
Nevertheless, if somehow the asset or following people gave the amount, then the present is free from taxes, and the donee does not require paying tax:
- When the relatives give it has a gift
- Or when someone gifts that at their wedding.
- Or got through a will or an inheritance.
- Or one receives it due to the sudden death of the giver.
- Or one receives it directly from authority as per Section 10(20) of the Income Tax Act.
- Or if it comes from a financing, institute, establishment, other academic establishments, other medical centres, clinics, or organisation did refer to the Section 10(23C) of the Income Tax Act, or if it comes from a foundation or organisation registered in the Section 12A or 12AA.
Conclusion
A gift in somebody's favour is voluntary; any individual who is the rightful owner of assets may transmit his assets via gift. This is, in fact, a transfer of asset to another individual for no compensation. As a result, the main feature of the present is that one can pass it to another individual without any concern.
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