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December 5, 2022

Gifting Property Know Income Tax and Stamp Duty Implications

by CA Shivam Jaiswal in Income Tax

Gifting Property Know Income Tax and Stamp Duty Implications

In India, property transfers as gifts are governed by the Transfer of Property Act, 1882 (“Act”). A gift of a property involves transferring the ownership of one’s property to another person by executing a gift deed. The gift deed is an instrument through which the immovable or movable property owner transfers his/her property to another person without consideration as a gift.

Gift deed

Any immovable property that satisfies the requirements of Section 122 of the Transfer of Property Act, 1882, may be transferred through a gift deed. A gift deed must be registered with the sub-registrar office in accordance with sections 123 of the Transfer of Property Act and 17 of the Registration Act of 1908, just like a sale deed, with the exception that no money is given in the transfer of the property. . Failing to do this, would render the contract invalid.

How property is gifted

The giver of the gift is referred to as the donor, and the recipient as the donee. The gift must be given and accepted during the donor’s and the donee’s lifetimes in order to be considered legal. A minor is incapable of gifting property as he/she is incapable of entering into agreements. However, the guardian of a minor can accept the gifts given to a minor on his/her behalf. The donor should make a gift without any consideration, i.e. the donor should not receive anything from the donee for making the gift.

Registration of gift deed

In the presence of both parties, a gift deed must be registered with the local sub-registrer office. Along with the gift deed, purchase agreement with Index II of the property, society registration certificate, share certificate, Aadhaar and PAN card of both parties, and society registration certificate, a nominal registration fee must be paid.

Recovation

Unless there is a pact between the contracting parties stating that the gift can be revoked on the occurrence of a certain event, a gift can’t be revoked. The Property Transfer Act’s Section 126 describes the circumstances under which a gift deed may be revoked by the donor. To prevent hiccups, it is frequently advisable to include a revocation clause while executing a gift deed.

Taxation

Gifts received by an individual or Hindu undivided family from any blood relative, as inheritance, as a marriage gift, or in contemplation of death are not taxable under Section 56 (2) (vii) of the Income Tax Act, 1961. Under other circumstances if the aggregate of gifts received exceeds Rs 50,000 in a year, then the gift becomes taxable.

Stamp duty

Each state has a different stamp duty policy for gift deeds. In comparison to a typical transfer of property to a third party, a lower stamp duty is applied when it is being given as a gift to a close relative. While in Punjab there is no stamp duty required when transferring property between blood relatives, the Maharashtra government levies a modest fee of Rs 200 when gifting property to blood relatives like parents, spouses, or siblings.

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