How to Draft a Gift Deed [+ Sample PDF]

A Gift Deed is a legal document used to voluntarily transfer property from one person (the donor) to another (the donee) without any exchange of money or consideration. It is often used in situations where individuals want to pass on assets or property, either as part of estate planning or as a gesture of love, affection, or gratitude. Drafting a gift deed is an important legal process, governed by specific laws and regulations. This article will explore the essential steps, legal requirements, and considerations involved in drafting a gift deed.

Definition and Importance of Gift Deeds

A Gift Deed is a legally binding document used to transfer ownership of property from one person to another without any exchange of monetary consideration. The property transferred could be movable, such as jewellery or vehicles, or immovable, such as land or houses. The donor must intend to gift the property voluntarily, and the donee must accept the gift.

The importance of a gift deed lies in its ability to formalize the transfer of property and avoid any future disputes. It provides legal proof of ownership transfer and ensures that the donor’s wishes are fulfilled without ambiguity. A registered gift deed is considered valid evidence in court and provides protection against claims of succession or inheritance.

What are the Laws Governing Gift Deeds

The execution of gift deeds in India is governed by several legal provisions, primarily the Transfer of Property Act, 1882, the Indian Stamp Act, 1899, and the Registration Act, 1908. These laws outline the requirements for a valid gift, the process for registering a gift deed, and the consequences of non-compliance with legal formalities.

Transfer of Property Act, 1882

This Act governs the transfer of property through gift deeds and outlines the conditions that must be met for a gift to be legally valid. According to the Act, a gift must be made voluntarily, and the property must be transferred without any consideration.

Indian Stamp Act, 1899

This Act determines the stamp duty that must be paid on a gift deed. Stamp duty rates vary from state to state and are essential for the gift deed’s legal validity.

Registration Act, 1908

As per this Act, all gift deeds involving immovable property must be registered at the Registrar or Sub-Registrar’s office to be legally enforceable.

Types of Properties That Can Be Gifted

Gifting can involve both movable and immovable property, and the legal process varies depending on the type of property being transferred.

Movable Property

Movable property includes assets such as vehicles, jewellery, stocks, bonds, and other tangible or intangible personal property. The process for gifting movable property is relatively simple and may not always require registration, but it is advisable to create a gift deed to formalize the transfer.

Immovable Property

Immovable property refers to land, houses, apartments, and other fixed assets. For immovable property, a gift deed must be registered under the Transfer of Property Act, 1882 and the Registration Act, 1908, to be legally valid.

Key Elements of a Gift Deed

For a gift deed to be valid, it must include several key components:

Identification of Parties (Donor and Donee)

The gift deed must clearly identify both the donor and the donee. The full name, address, age, and relationship between the parties (if any) should be mentioned. This establishes who is giving the gift and who is receiving it.

Free Will and Absence of Consideration

A valid gift deed must be made out of the donor’s free will, without any coercion, fraud, or undue influence. Additionally, there must be no consideration involved (i.e., no exchange of money or goods).

Property Description

The gift deed should contain a clear description of the property being gifted. For immovable property, this includes details such as the property’s location, dimensions, boundaries, and any distinguishing features. For movable property, include specifications such as serial numbers or other identifiers.

Acceptance by the Donee

The donee must accept the gift during the lifetime of the donor, and this acceptance must be explicitly mentioned in the gift deed.

Step-by-Step Guide to Drafting a Gift Deed

Step 1: Collecting Required Information

Before drafting the gift deed, collect all the necessary details about the property and the parties involved. This includes documents proving ownership of the property, identification proof of the donor and donee, and details about the witnesses.

Step 2: Describing the Gifted Property

The next step is to include a detailed description of the property being gifted. This section should provide sufficient detail to ensure that there is no ambiguity about what is being transferred.

Step 3: Stating the Purpose of the Gift

The gift deed should state that the property is being gifted voluntarily out of love and affection, without any consideration. This clarifies that the gift is not part of a sale or any other financial transaction.

Step 4: Including Witness Information

The presence of at least two witnesses is mandatory for the registration of a gift deed. Their names, addresses, and signatures must be included in the document.

Step 5: Drafting the Key Clauses

The deed should include key legal clauses, such as the consideration clause, the ownership clause, and the delivery of possession clause. These clauses ensure that the donor has willingly transferred ownership and possession of the property to the donee.

Step 6: Stamp Duty and Registration Process

Once the gift deed is drafted, it must be printed on stamp paper of appropriate value and signed by both parties. The gift deed should then be registered at the Registrar or Sub-Registrar’s office, where the property is located (for immovable property).

Essential Clauses to Include in a Gift Deed

A well-drafted gift deed must include the following essential clauses:

Consideration Clause

This clause affirms that the gift is being made without any monetary consideration, emphasizing the voluntary nature of the transfer.

Ownership Clause

The ownership clause must clearly state that the donor is the legal owner of the property and has full rights to transfer it to the donee.

Delivery of Possession Clause

This clause outlines the method and timing of the delivery of possession of the property from the donor to the donee.

Revocation Clause

While gifts are generally irrevocable, the gift deed may include a clause stating conditions under which the gift can be revoked. For example, if the donee fails to meet specific obligations, the donor may revoke the gift.

Gift Deed for Different Types of Property

When drafting a gift deed for movable property, ensure that the document includes a detailed description of the property being gifted, such as make, model, serial numbers, and any other unique identifiers.

A gift deed for immovable property must include the property’s location, dimensions, boundaries, and other essential details. It must be registered with the relevant authorities to be legally valid.

Stamp Duty and Taxes on Gift Deeds

The stamp duty on gift deeds varies from state to state. For example:

• Delhi: 6% for men, 4% for women.
• Maharashtra: 5% for non-family members, 3% for family members.
• Tamil Nadu: 7% for non-family members, 1% for family members.

Under Section 56(2)(x) of the Income Tax Act, 1961, if a donee receives a gift exceeding ₹50,000, it is taxable unless it is received from a relative or on specific occasions, such as marriage.

Gifts received from relatives, inheritance, or through a will are exempt from income tax. Additionally, gifts received from charitable organizations or local authorities are also exempt.

Legal Validity and Registration of Gift Deeds

For immovable property, the gift deed must be registered under the Transfer of Property Act, 1882 and the Registration Act, 1908. Registration is essential to make the transfer of ownership legally valid.

Documents Required for Registration

The following documents are required for registering a gift deed:

• Original gift deed
• Proof of identity of the donor and donee (e.g., Aadhaar card, PAN card)
• Proof of ownership of the property (e.g., sale deed, title deed)
• Passport-sized photographs of both parties
• Witness identification documents

Revocation of Gift Deeds

A gift deed may be revoked if it was executed under duress, fraud, or misrepresentation. According to Section 126 of the Transfer of Property Act, 1882, a gift may also be revoked if it includes a revocation clause or if the donee fails to comply with certain conditions.

If a gift deed is to be revoked, the donor must file a lawsuit in a court of law. The court will examine the circumstances under which the gift deed was executed and determine whether it can be revoked.

Download a sample Gift Deed PDF to better understand the structure and key components of a legally valid gift deed. This sample will guide you in drafting your own.