What to know about drafting, registering, stamp duty and tax implications
Properties are a blessing in disguise, since they not only contribute to an individual’s economic, financial, business, agricultural, or residential prosperity; but they also symbolize the spiritual and emotional connection to nature seen in the Gift.
A person may gift anything from a pencil to a house, vehicle, or college education to the law, but anything that moves should be treasured as a gift of movable property. Please get the idea of the legal ramifications.
Gift Deed :
A gift deed transfers property in the form of a gift. The gift deed constitutes the document that details the transfer of a gift, as well as its essentials such as the name of the donor and the recipient, the properties of the gift, the date, witnesses, and so forth. It is not necessary to create a gift deed for movable or immovable property. A gift deed isn’t required in respect of immobile property, but its registration is mandatory under the Indian Registration Act 1908, section 17. An unregistered gift deed in relation to immobile property is invalid under section 123 of the Indian Registration Act, 1908.
Gift Deeds: Key Elements :
Who can be a donor :
A person must meet the two conditions specified in Section 7 of the Transfer of Property Act, 1882 to be a donor.
Any competent individual can be a donor. A personal donor is any individual of legal capacity, a firm, a company, an HUF or a juridical person. However, a child, an unsound person, or a person whose personal attributes are otherwise ineligible to be donors. It is not lawful for someone in a fiduciary position, such as a trustee, agent, or partner, to make gifts of the vested assets on behalf of their partners or co-trustees.
The transferable property may be the person entitled to it or it may be the person with the legal right to transfer it. However, the person authorized by the heir to transfer the property as a gift may be a donor.
Who May Be A Donee :
Any legal entity such as a firm, company, or institution can be a donee. Even if the person who receives the gift is not competent to contract, a donee can be anyone living, including the individual themselves. A minor, insane individual, or a child in the womb may be donees, subject to lawful acceptance or rejection by them or on their behalf. A guardian may accept or decline a gift on the basis of majority. In order to gift money to the public or an unknown individual, gift cannot be accepted.
Universal Donee :
When the whole of the donor’s property is transferred, donee becomes liable for all the debts and liabilities, in respect of gifted property, incurred by the donor at the Gift time. Such donee is a universal donee.
Transferring ownership from a donor to a donee must take place :
To transfer property, the donor must first own the property before handing it over. Therefore, to complete the legal transfer of Gift, the donor must himself be the sole owner of the property to be gifted.
Specific and existing property must be transferred :
An immovable Gift can be concerned either as a movable or an immovable asset. However, the asset must be defined and specific. There can be no doubt about the identity of the asset. The asset must be existing and not future property. One may transfer the asset entirely or partially.
There must be a free and voluntary transfer:
Neither the donor nor the donee can be forced to make a donation or accept the Gift. The donor’s words must not be used to fraud, force, undue influence, misrepresentation, coercion, or mistake, and the donee’s words must not be used to fraud, force, or undue influence, misrepresentation, coercion, or mistake when making a gift. The validity of a gift transaction is not dependent on the general authority in the relationship between donor and donee. Gift should be independently evaluated in the presence of undue influence in the case of donation.
Transferring gifts without consideration must be allowed :
Aside from monetary considerations, other than natural love and affection, any consideration, even a small or nominal amount, makes gift transfervoid, even if the consideration is money or any other valued item as consideration will change the nature of the transfer from gift to sale or exchange. Consideration in the form of spiritual or moral benefit, such as caring for a donor throughout his life, is not considered.
It must be accepted by the donee during the donor’s lifetime :
The law states that a gift has to be accepted freely. When the gift can be accepted, it is discussed in the following section. The donor’s lifetime or the time the donor is competent to transfer a gift as per section 122 of the Transfer of Property Act, 1882, may be used for making gift acceptance. If the gift is accepted after the donor’s death, it is void. Any person authorised on this basis may make the gift acceptance.
Onerous Gifts :
An onerous gift is one that carries both obligation and estate protection. The Transfer of Property Act, 1882 Section 127 deals with an onerous gift. If two or more onerous gifts are transferred in a single transaction, the donee may either accept the whole deal or reject it completely. If such gifts are transferred in a separate and independent deal, the donee may accept some of them and reject others. Even if a person lacks the mental capacity to contract and acquire knowledge of the obligations associated with an onerous gift, he retains his property until he becomes competent to do so and knows of the gift’s obligation.
In addition to the information provided in the preceding paragraph, a gift deed is an important part of gifting. The Transfer of Property Act, 1882, governs the transfer of property in general, but there are legal differences between Hindu law and the Transfer of Property Act, 1882, for gifts. A gift under Hindu law is similar to that under the Transfer of Property Act, 1882, but there is a significant difference in Muslim law.
We must keep in mind that the tax exemptions granted to our benefits and our mutual benefit are applied only once, and not twice. It is therefore advisable to obtain a gift deed through a civil lawyer rather than using it as a means to evade taxes or commit other illegal acts. The language of the deed is important in determining whether it is a gift deed or any other transfer document. If the court has to determine whether a transaction is a gift or a sale, the words used in the deed should be used to describe it.
A well- drafted gift deed is critical in its creation. Every required step of the deed must be fulfilled to create a valid one.