A gift deed is a document that allows a person (the donor) to transfer ownership of any property or asset to another individual (the donee). The gift is made without any consideration (money) changing hands, meaning the donee assumes ownership without having to provide the donor with any payment. A Gift Deed can be an effective method of changing ownership to a family member, such as children or grandchildren, who are about to assume ownership of the property.
In India, gift deeds are used to transfer immovable property, such as land, a house, or a flat, to a family member. To enforce the terms of your Gift Deed, it must be properly stamped and registered in accordance with the regulating Acts. Stamp duty and registration fees will differ from state to state and will also depend on the value of the property, the relationship of the benefit to the property, as well as its location.
In this blog, we will explain the aspects of stamp duty and registration fees for gift deeds, with a focus on the new rules applicable in India.
What is a Gift Deed?
A gift deed is a written document that records the transfer of the ownership of a property (movable/immovable) from one person – the donor to another person – the donee without any monetary consideration.
Key features of a valid gift deed are –
- It must be executed voluntarily and without coercion.
- The donor shall be the lawful owner of the property.
- The property must be transferable under the law.
- The deed must be signed, witnessed, stamped, and also registered.
Once registered, a gift deed cannot be revoked unless specific revocation conditions are included in the document.
Charges for Registration – The Other Half of the Process
In addition to the payment of stamp duty, you will also need to register the gift deed at the sub-registrar’s office in the property location. Registration guarantees that the transfer is made a matter of record in the government’s books and protects both parties if there is a later dispute over the transaction.
Most states charge about 1% of the property’s market value for the registration fee, sometimes with a maximum (for example, ₹30,000). Without registration, this deed may be completely void.
How do State Governments Calculate Stamp Duty?
Stamp duty, unlike income tax, is a state subject, meaning that each state government can establish their own rates and requirements. The cost of tax will apply depending on three factors:
- The location of the property – Each state has its own schedule of fees.
- The relationship between the donor and donee – Many states provide huge concessions if the gift is made to an immediate family member, such as a parent, child, or spouse.
- The type of property – Rates may differ for agricultural land versus residential or commercial property.
Tax Implications of Gift Deeds
While stamp duty and registration are mandatory, one should also consider income tax rules. Under the Income Tax Act:
- Property received as a gift from a relative is tax-free.
- Property received from a non-relative is taxable if the stamp duty value exceeds ₹50,000.
This makes it all the more important to execute the transfer carefully and within the family, where possible.
Conclusion
Gifting your property to a loved one (by means of a gift deed) is a caring way to provide for them, but there are legal obligations. The payment of stamp duty and registration fees is not an option; these charges effectively make the transfer official and will protect the new owner from potential subsequent disputes. The fee structures are different by state, but the vast majority of governments reduce the amount due when gifting property to close relatives.
As always, it is good practice to ensure you calculate the correct duty applicable in your State and finalise the registration processes within the local Sub-Registrar Office to mitigate any issues in the future.
When you know what charges you face, follow the appropriate process and ensure that you are meeting any appropriate state and income tax obligations, you will smooth out the process as much as possible and provide certainty. Ultimately, these formalities are in place to ensure that your gift of property truly achieves your intended legacy for the new owner of the property.
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