What is gift deed?
Also called: daan patra, hiba, gift deed registration
Property can be given away without payment through a registered gift deed, which the recipient must accept while the donor is alive. Many states charge much lower stamp duty when the gift is to close family.
Section 122 of the Transfer of Property Act defines a gift as a voluntary transfer without consideration, accepted by the donee during the donor's lifetime. Section 123 requires a gift of immovable property to be made by a registered instrument signed by the donor and attested by at least two witnesses. No registration, no gift. A Muslim hiba is the exception and can be oral if declaration, acceptance and delivery of possession are all there, though a registered deed is still far safer.
Stamp duty is where family gifts become cheap. Maharashtra charges a flat ₹200 on a gift of residential property to a spouse, child, grandchild or a deceased son's widow. Uttar Pradesh capped duty on gifts to listed family members at ₹5,000 in 2023. Other states charge a reduced percentage or the full rate. Registration fees apply either way.
On the income-tax side, property received as a gift from a 'relative' as the Act defines it (spouse, siblings, parents, children and their spouses, among others) isn't taxed in the recipient's hands, and nor is property received by will or inheritance. From a friend, a gift of property with a stamp duty value over ₹50,000 is taxable. Gifting to a spouse brings in the clubbing rules, so rent from the gifted flat may still be taxed as the donor's income.
A gift is hard to undo. Section 126 allows revocation only on grounds both sides agreed in the deed or on grounds that would void a contract, such as fraud. For elderly parents the main remedy is Section 23 of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007: if the gift was made on the condition that the child would look after the parent and the child doesn't, the tribunal can declare it void.
A father in Pune gifting a ₹1.3 crore flat to his daughter pays ₹200 in stamp duty under Maharashtra's family concession, plus the registration fee, instead of about ₹7.8 lakh at the 6% sale rate. If she sells later, his purchase cost and holding period carry over to her.
Gifting a flat to a son or daughter without writing the care condition into the deed. If the relationship sours, a senior citizen has a very hard time reversing a gift that states no condition.
Questions people ask about gift deed
Can a gift deed be cancelled?
Only in narrow cases: if the deed allows revocation on an event both sides agreed, if it was obtained by fraud or coercion, or under the senior citizens' law where a stated care condition wasn't honoured.
Is a gift deed better than a will?
A gift takes effect at once and is hard to challenge later; a will takes effect only on death and can be changed at any time. Parents who want to keep control of the home usually prefer a will.