In India, one of the most common modes of transfer of property through gift deed. A gift is an item given to someone without the expectation of getting anything in return. Generally, a gift of property is regarded as a transfer of ownership of a property from one person who is known as the sender to the other person who is known as the receiver where the sender willingly brings in to effect such transfer without any consideration i.e. without an expectation of receiving anything in return. Gift can be in the form of movable or immovable property. The provision related to the gift is dealt with under section 122 of the Transfer of Property Act, 1882.
- Transfer of ownership.
- Existing property i.e. movable or immovable.
- Transfer without consideration.
- The transfer made voluntarily i.e. with free consent.
- Acceptance of the gift.
Transfer of ownership: The donor (the person who transfers the property) must divest himself of absolute interest in the property and vest it in the donee (the person to whom property is transferred). The transfer of absolute interest implies the transfer of all the rights and liabilities in the property.
Existing property: The property, which is the subject matter of the gift, may be movable or immovable but it must be in existence at the time of making a gift and must be a transferable one within the meaning of section 5 of the transfer of property through gift deed Act.
A transfer without consideration: A gift is undoubtedly a transfer that does not contain any element of consideration in it. A gift must be gratuitous i.e. the ownership in the property must be transferred without consideration. The term consideration has been defined under section 2(d) of the Indian Contract Act.
Voluntary Transfer: The donor must make the gift voluntary i.e. with his free will and free consent. Free consent is consent in which the donor has complete freedom to make the gift i.e. without any force, fraud, or undue influence.
Acceptance of the gift: The donee must accept the gift. Property cannot be given to a person if he has not given his consent. The acceptance must be made during the lifetime of the donor and while he is still capable of giving.
Donor: A donor is a person who makes the transfer of property. Any person who is of sound mind and is competent to enter into an agreement can be a donor. This means that at the time of making a gift, the donor must be major and of sound mind. This implies that a gift by a minor or an insane person is void. A minor cannot be a donor as he/she is not capable of entering into a contract. Not only the capacity, but the donor must also have the right to make a gift. The right of the donor is determined by his ownership rights in the property at the time of transfer because a gift means the transfer of ownership.
Donee: A donee is a person who accepts the gift/ transfer made to him. A minor can also be a donee, provided that a gift transferred to a minor shall be accepted on his behalf by a competent person. It must be accepted during the lifetime of the donor; otherwise, it would be rendered invalid under the property laws in India. However, a gift made to an insane person or a minor or even to a child existing in the mother’s womb is a valid subject to lawful acceptance by a competent person on his behalf. Juristic persons such as firms, institutions, or companies are deemed as competent donee, and gifts made to them are valid.
Section 123 of the Transfer of Property Act, 1882 lays down two modes for affecting a gift depending upon the nature of the property. For the gift of immovable property, registration is compulsory. In the case of movable property, the transfer may be either delivered or by registration. Modes of transfer of various types of properties are discussed below:
Immovable Properties: In the case of immovable property, registration of transfer of property is compulsory irrespective of the value of the property as per section 17 of the Indian registration act. Registration of document including gift deed implies that it should be in writing, signed by the donor, attested by two competent witnesses, and duly stamped.
Movable properties: In the case of movable properties, the registration of transfer of property is optional under section 18 of the Indian Registration Act.
- A movable property
- Immovable property
- An existing property
- A transferable Property
- A tangible property
- Happening of pre-decided event: The donor and donee must agree while making the gift that on the happening of a specified event, the gift shall stand revoked. However, that event must not depend on the donor’s will, otherwise, the gift shall be void for the part it so depends on. The condition must be agreed upon mutually.
- Recession: If the gift is made by coercion, undue influence, fraud or misrepresentation, it can be revoked. Sec 19 and 19A of Indian Contract Act, 1872 states that in case the contract is entered into between the parties with the consent of one of the party is obtained by coercion, undue influence, fraud or misrepresentation, the consent is not free and the contract is voidable at the option of the party whose consent was so obtained.
A gift under Hindu law needs to be in writing. However, a gift under the law is not valid unless it is accompanied by delivery of possession from the donor to the donee. However, where physical possession cannot be delivered, it is enough to validate a gift, if the donor has done all that he could do to complete the gift, so as to entitle to the donor to obtain the possession. A gift under the act can only be affected in the following ways:
For the purpose of making a gift of immovable property, the transfer can be affected by a registered instrument signed by the donor and attested by two witnesses.
For the purpose of making gifts of movable property, the transfer may be affected by a registered document signed by the donor or by delivery.
The essential ingredients of a valid gift under Muslim law are as follows:
- It should be voluntary.
- It should be without consideration.
- It should be accepted by the donee.
- The acceptance must be in the lifetime of the donor.
Under Muslim law, a deed of the gift becomes valid when there is a declaration of gift by the donor and acceptance of the gift, express or implied by the donee, delivery of possession by the donor to the donee. Only when these conditions are implied, the gift is complete under Muslim law. It is essential to the validity of a gift that there should be the delivery of such possession. The taking of possession of the subject matter of the gift by the donee is necessary to complete a gift.
Gifting is often used to transfer property or money within the family or to relatives by way of will or inheritance. However, gift has also been used as a medium to evade taxes due to which the government has introduced the Gift Tax Act, 1958 to curb tax invasion activities. Gifts that are exempted from tax are as under:
- Gifts up to Rs. 50,000 in a financial year are exempted from tax. However, if you receive gifts above the value of Rs. 50, 000, the entire gift becomes taxable.
- If you receive any property for inadequate consideration, then the difference between the consideration and the stamp duty value would be considered as a taxable gift.
- Gifts from specified relatives are exempted from tax, regardless of amount. These relatives are spouse, father, mother, brother, and sister.
- Gifts are given in contemplation of marriage of the recipient.
- Gifts are given in contemplation of the death of the donor and gifts given under a will and inheritance.
Similarly, if an immovable having stamp duty value in excess of Rs. 50,000 or movable property such as shares of the company, jewelry, etc. having a market value in excess of Rs.50,000, the same is subject to tax. Such income is taxable at applicable tax rates in the year of receipt.
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