Gifting a property is not the same as making a birthday present to a loved one. It is a process to be completed under a legalized framework and should be in accordance with the Property Registration Act. So, when you have decided about gifting property to a legal heir or any family member, you must take into consideration the following points.
Gift deed format
Gifting a property is done by signing the gift deed to clarify the final ownership of the property. It does require registration with the registrar’s office of the city where the immovable property is located. The gift deed format can be found online or you can meet the lawyer for the same. Gift deed format contains the name of the donor of the property and the donee, the relationship of donor with the donee. It also contains the name and sign of the witnesses along with the name of the place where it is signed and executed and date of the same.
The gift deed entails how the income from the property in the form of sale or rent in future will be the rightful belonging of the donee and that only the donee will be responsible for all the payments of pending as well as future expenses. If agreed upon, the gift maker can indemnify the donee against all the encumbrances.
The gift deed will also contain the description and specifications of the property to be gifted and entails clearly the rights and authority of the donor. A confirmation clause stating the delivery of the possession of the property is also included in the deed format.
Gift deed can be made online too these days. There are websites available where you can just mention the state and the readymade draft is delivered to you on the payment of the charges asked by the website. The deed is then printed on the stamp paper and the gift maker and donee can move to the registration office for its registration. There they get the property registered in the name of the donee by paying the gift deed stamp duty.
Legal requirements for gifting property
Gifting a property to a loved one has to be done through legal documents. The person to whom the gift of property is being made has to cross the minor age as only majors are qualified to sign the contract. The transfer of the property as gift in case of minor will involve legal guardians and on the attainment of age of 18 years, the minor can claim or refuse the gifted property as per his or her desire. The gift deed has to be registered and signed in front of the magistrate/registrar. The registrar should check the gift deed stamp is placed properly and the gift deed stamp duty charge is paid in full before linking the registration of the property in the name of donee.
Tax implications of gifting property
The person gifting the property to immediate family members like spouse, parents and children is not liable to pay gift tax on immovable property in India. The list of other members of family who can be made gift of property without paying tax includes siblings, spouse’s siblings, lineal ascendants and descendants of the person and his/her spouse.
The tax liability arises when the gifted property is sold by the donee. Cost of the property is taken as the cost paid by the previous owners to find the total profit. And that the short term or long term capital gain is applicable is found out by holding period. If the holding period is less than 36 months, the short term capital gain tax is implied and above 36 months, the long term capital gain tax is applicable which can also be avoided if the proceeds of the sale are reinvested in buying of property, or deposited in the bank in long term capital gain account scheme or invested in capital gain bonds of NHAI or Rural Electrification Corporation (REC).
Property gift deed rules you must know
Before signing the deed, you must be aware of these property gift deed rules:
- The gift deed cannot be revoked in any case except in special condition where the person to whom the gift is made dies in the lifetime of the gift maker and has no descendants left. This arrangement also should be mentioned clearly in the deed, and then only it becomes revocable.
- The person gifting property can state his rights and authority and its nature in the gift deed. He can also state the right to take back the gift in the deed failing which the maker of the property gift will not be able to claim his rights on the gifted property in future.
- The stamp duty charges on gift deed are the same as that applicable on a normal case of transferring property.
- Property in India cannot be gifted to a foreign national. But, if the relative is NRI or PIO, then except plantation farms and agricultural lands, all types of residential and commercial properties can be gifted.
- A person becomes the legal owner by the way of gift deed only when the deed is registered. The unregistered gift deed does not make ownership document.
- While gifting a property, the person can keep the partial rights over the property stating the same clearly in the gift deed.
- Gift deed cannot be changed as is the case with the will. So, if the property is to be transferred to the legal heirs, the better way is to write a will. It gives the owner the freedom to make changes in future, if required.
- All dues of the gifted property are the responsibility of the donee once the gift deed is signed. So, it is better to ensure that all dues are paid if you do not want the property to come to you with any financial burden.
So, make sure that your motive of making a gift of property to any of your dependent, or relative or loved ones is absolutely clear to you. If you have any doubts on any aspect, it is better to hold the thought and get all answers first before inking the deed.