Gifting Property in India: Legal Rules, Taxes and Everything You Should Know

• Gift deed registration is mandatory for immovable property

• Gifts above ₹50,000 from non-relatives may attract income tax

• Stamp duty rates vary by state, with concessions for close relatives

Gifting property in India is often driven by family relationships, emotion and tradition. However, what may appear to be a simple act of goodwill is, in reality, a legally binding transaction. Without proper documentation, registration and tax compliance, a property gift can later become a source of dispute or financial liability.

Whether you plan to transfer property to a spouse, child, sibling or another individual, it is important to understand the legal framework and tax implications before proceeding.

What Is a Gift Deed?

A gift deed is a legal document through which a person voluntarily transfers ownership of movable or immovable property to another person without any monetary consideration.

The person transferring the property is known as the donor, while the recipient is called the donee.

Unlike a Will, which comes into effect after the owner’s death, a gift deed becomes legally effective immediately after execution and registration. This immediate transfer of ownership makes proper compliance crucial.

Registering a gift deed significantly reduces the chances of inheritance-related conflicts in the future.

Types of Property That Can Be Gifted

A gift deed can cover both movable and immovable property.

Immovable property includes:

• Land

• Houses

• Flats

• Buildings attached to the earth

Movable property includes:

• Jewellery

• Vehicles

• Shares and bonds

• Paintings and valuables

However, certain conditions must be met:

• The donor must be the absolute legal owner.

• The property must already exist.

• The property must be transferable under law.

Future or contingent property cannot be gifted.

Legal Framework Governing Property Gifts

Property gifting in India is governed primarily by the Transfer of Property Act, 1882 and the Registration Act, 1908.

Under the law:

• The gift must be voluntary.

• No financial consideration should be involved.

• The donee must accept the gift during the donor’s lifetime.

• Registration is compulsory for immovable property.

If the donor does not have a clear title or is acting under coercion, fraud or undue influence, the gift deed can be challenged in court.

Once registered properly, ownership transfers immediately to the donee.

Key Rules You Cannot Ignore

There are certain non-negotiable requirements:

• Both donor and donee must be adults.

• Both parties must be present at the time of registration.

• At least two witnesses must sign the deed.

• Stamp duty must be paid as per state laws.

• The deed must clearly mention that the transfer is made out of love and affection, without payment.

Failure to comply with stamp duty requirements can render the gift deed invalid.

How to Draft and Register a Gift Deed

The process typically involves:

1. Mentioning the date and place of execution.

2. Providing full details of donor and donee.

3. Including complete property description, boundaries and ownership details.

4. Printing the deed on appropriate stamp paper.

5. Visiting the sub-registrar’s office with two witnesses.

6. Completing biometric verification and signing.

After verification, the registration certificate is issued, legally confirming the transfer.

Stamp Duty and Registration Charges

Stamp duty depends on:

• The property’s market value

• The relationship between donor and donee

• State-specific regulations

Many states offer concessional stamp duty rates when gifting property to close relatives. Registration charges are typically around 1% of the property value.

Stamp duty may be paid through e-stamping, stamp paper or franking, depending on local rules.

Because rates vary widely across states, checking the applicable state notification before execution is essential.

Income Tax Implications

Although the old Gift Tax Act has been abolished, gifts are now taxed under the Income Tax Act under the head “Income from Other Sources.”

Here’s what you should know:

• If gifts received from non-relatives exceed ₹50,000 in a financial year, the entire amount becomes taxable.

• For immovable property, if the stamp duty value exceeds ₹50,000, it may become taxable.

• The taxable amount is added to total income and taxed according to the applicable income slab.

Stamp duty value plays a crucial role in determining tax liability.

If there is a difference between agreement date and registration date, certain provisions allow using the earlier stamp duty value, subject to conditions.

Taxpayers can also challenge excessive stamp duty valuations through a Valuation Officer. A 10% tolerance limit is permitted under Section 56(2)(x).

Tax Exemptions You Should Know

Certain gifts are fully exempt from income tax, regardless of value. These include gifts received from:

• Spouse

• Parents

• Siblings

• Lineal ascendants and descendants

Additionally, gifts received:

• On the occasion of marriage

• Through inheritance

• Under a Will

• From registered charitable institutions or local authorities

• In contemplation of death

are generally tax-free.

Understanding these exemptions can help avoid unnecessary tax liability.

Can a Gift Deed Be Cancelled?

A gift deed, once executed and accepted, is usually irrevocable.

However, under Section 126 of the Transfer of Property Act, revocation is possible under limited circumstances:

• If a specific conditional clause was agreed upon at the time of execution

• In cases of fraud, misrepresentation or coercion

The donor cannot cancel the gift unilaterally without legal grounds. Any revocation clause must be clearly mentioned in the original deed.

Final Takeaway

Gifting property in India is not just an emotional decision; it is a legal and financial commitment. From drafting a valid gift deed to paying proper stamp duty and understanding tax implications, every step matters.

Ensuring proper documentation, registration and tax compliance helps avoid disputes and ensures a smooth transfer of ownership.

Before executing a property gift, consulting a legal or tax professional can provide clarity and prevent costly mistakes.