Table of Contents
- What is a Gift Deed?
- Essential Components of a Gift Deed:
- Stamp Duty Rates in Different States:
- Recent Changes in Uttar Pradesh
- What are the Tax Implications on Gift Deeds in India:
- Taxable Gifts
- Properties That Can Be Given As Gifts
- Gift Deed Registration Fee Rates in 2024
- How is the stamp duty rate on Gift Deed Calculated?
- Payment of Stamp Duty: Who Pays?
- Legal Requirements For A Gift Deed
- Advantages of Gift Deed
- Faq's
Gifting a house property in India comes with important income tax and stamp duty considerations that individuals must take into account. In India, the stamp duty rates for gift deeds can range from as low as 2% to as high as 7% of the property value, depending on the state where the transfer is taking place.
However, it is noteworthy that many states in India offer waivers or significantly reduced stamp duty charges when the gift deed involves a transfer between blood relatives. This provision recognises the familial nature of such property transfers and aims to ease the financial burden on the parties involved.
Recent legislative changes, such as the Uttar Pradesh government's decision to introduce a standard stamp duty of just Rs 5,000 for property transfers among blood relatives, further highlight the evolving landscape of gift deed regulations in the country. These developments are intended to simplify the process and encourage intra-family property transfers.
Alongside the stamp duty implications, the gifting of a house property also has income tax ramifications under Section 56 of the Income Tax Act, 1961. Gifts exceeding a value of Rs 50,000 may be taxed as 'Income from Other Sources' for the recipient, underscoring the need for individuals to be aware of the tax implications of such transactions.
In this article, we will look at the definition of a Gift Deed, what the stamp duty rate for gift deeds are in the states of India, How to calculate stamp duty on gift deed, Who pays the stamp duty on gift deed and What property that can be gifted and the legal requirements for gift deed.
What is a Gift Deed?
A Gift Deed is a legal document that facilitates the transfer of ownership of property or assets from one individual to another as a gift, without any monetary exchange involved. This written instrument formalizes the voluntary transfer of property rights, where the giver, known as the "donor," transfers the asset to the recipient, referred to as the "donee," without expecting anything in return. Gift Deeds are commonly used for gifting real estate, cash, or other valuable assets, and they play a crucial role in estate planning by allowing individuals to pass on assets to their loved ones during their lifetime. The process of creating a Gift Deed involves drafting the document with relevant details, stamping and registering it as per state laws, delivering possession of the property, and executing the deed in the presence of witnesses to make the transfer legally binding.
Also Read: Property transfers through gift deeds
Essential Components of a Gift Deed:
Gift Deed is a legal document that facilitates the transfer of ownership of property or assets from one individual to another as a gift
When drafting a gift deed, certain essential components must be included:
- Details of the donor and donee
- Description of the property being gifted
- Relationship between the donor and donee
- Clauses regarding liabilities, rights, and possession
- Delivery clause indicating the transfer of possession
Stamp Duty Rates in Different States:
State where gift deed is registered | Stamp duty as percentage of the property value |
UP | Rs 5,000 |
Haryana | 5% |
Delhi | 4% |
Maharashtra | 3% |
Gujarat | 3.5% |
Rajasthan | 6% |
Madhya Pradesh | 5% |
Andhra Pradesh | 2% |
Himachal Pradesh | 6% |
Tamil Nadu | 7% |
Karnataka | 5% |
Punjab | 6% |
Bihar | 5.7% (for women) and 6% (for men) |
Jharkhand | 3% |
Kerala | 2% |
Madhya Pradesh | 2.5% |
Chhattisgarh | 5% |
Uttarakhand | 5% |
Himachal Pradesh | 5-6% |
Odisha | 3% |
Telangana | 0.5 % (subject to a minimum of Rs 1,000 and maximum of Rs 10,000 |
J&K | 3-7% |
Assam | 5.6% |
Chandigarh | 5% |
Goa | 3%-6% |
Manipur | 7% |
Sikkim | 1% |
Arunachal Pradesh | 6% |
Recent Changes in Uttar Pradesh
The Uttar Pradesh government has made significant revisions to stamp duty and registration charges to boost revenue, setting a maximum stamp duty of Rs 5,000 for gift deeds, previously at 5% in Noida and 7% elsewhere in the state. Registration fees have also been adjusted from Rs 20,000 to one percent of the property value, impacting properties above Rs 20 lakh. Moreover, the government introduced stamp duty rebates under the PLEDGE scheme for private industrial park developers, offering up to 100% exemption for women entrepreneurs in specific regions, aiming to stimulate entrepreneurship and economic growth.
What are the Tax Implications on Gift Deeds in India:
Gift deeds are also subject to tax implications under Section 56 of the Income Tax Act, 1961.The tax implications on gift deeds in India vary based on the nature of the gift, the relationship between the donor and the donee, and the value of the gift. In India, gifts to resident Indians from NRIs, regardless of the relationship, on the occasion of marriage or through a will, are exempt from tax. However, gifts exceeding Rs 50,000 in value may be taxed under the head of 'Income from Other Sources'. The tax treatment of gifts to NRIs by resident Indians also varies, with gifts from NRI relatives to resident Indians being exempt from taxation, while gifts from non-relatives exceeding Rs 50,000 may be subject to NRI gift tax. It is essential to understand these tax implications to ensure compliance with income tax laws when engaging in property transfers through gift deeds in India.
Gift deeds are also subject to tax implications under Section 56 of the Income Tax Act, 1961
Taxable Gifts
Gifts other than those falling under the exempt categories are taxable. This includes:
Monetary Gifts: Any sum of money exceeding Rs. 50,000 received by an individual or HUF is taxable as income from other sources.
Immovable Property: Gifts of land or buildings are taxable if the stamp duty value exceeds Rs. 50,000, unless received from relatives or on marriage.
Moveable Property: Prescribed movable property like shares, jewellery, or art, received without consideration exceeding Rs. 50,000, is taxable. Similarly, if the fair market value of such property exceeds the consideration paid by Rs. 50,000, it is taxable as income from other sources.
Type of Gifts | Money Limit | Amount taxable |
Any sum of money without consideration | Sum > Rs. 50,000 | Entire sum of money |
Immovable property without consideration | Stamp duty value > Rs. 50,000 | Stamp duty value of the property |
Any immovable property for inadequate consideration | Stamp duty value* exceeds consideration by > Rs. 50,000 | Stamp duty value Minus consideration |
Any property (jewellery, shares, drawings, etc.) other than immovable property without consideration | Fair market value (FMV)* > Rs. 50,000 | FMV of such property |
Any property other than immovable property for consideration | FMV exceeds consideration by > Rs. 50,000 | FMV Minus consideration |
Properties That Can Be Given As Gifts
Key requirements for a property to be gifted in India are:
- The property can be either movable or immovable in nature.
- The property must be an existing, tangible asset, and not a future property.
- The property should be transferable under the law.
The search results indicate that the donor must have the legal capacity to transfer the property, and the donee must willingly accept the gift. Certain types of properties, such as coparcenary property under Hindu law, may require additional consent from other family members for a valid gift deed.
Overall, the property gifted must meet these essential criteria to be considered a valid gift under Indian laws.
Also Read: Property Tax In India 2024: Key Insights, Overview & Taxation Guidelines
Gift Deed Registration Fee Rates in 2024
State | Registration fee as percentage of property value |
UP | 1% |
Haryana | 1% |
Delhi | 1% |
Maharashtra | 1% |
Gujarat | 1% |
Rajasthan | 1% |
Madhya Pradesh | 1% |
Andhra Pradesh | 1% |
Himachal Pradesh | 1% |
Tamil Nadu | 1% |
Karnataka | 1% |
Punjab | 1% |
Bihar | 1% |
Jharkhand | 1% |
Kerala | 1% |
Madhya Pradesh | 1% |
Chhattisgarh | 1% |
Uttarakhand | 1% |
Himachal Pradesh | 1% |
Odisha | 1% |
Telangana | 1% |
J&K | 1% |
Assam | 1% |
Chandigarh | 1% |
Goa | 1% |
Manipur | 1% |
Sikkim | 1% |
Arunachal Pradesh | 1% |
How is the stamp duty rate on Gift Deed Calculated?
The stamp duty rate on a Gift Deed is calculated based on various factors, including the market value of the property, the location of the property, the relationship between the donor and the donee, and the specific regulations of the state where the gift deed is being executed. Different states in India have varying percentages for calculating stamp duty on gift deeds, ranging from 2% to 7% based on the property value. Additionally, some states offer exemptions or concessions on stamp duty for gifts between family members or blood relatives. The stamp duty rate can also be influenced by the gender of the property owner, the type of property being gifted (residential or commercial), and the age of the owner, with senior citizens often receiving subsidies on stamp duty charges. Understanding these factors and consulting legal experts can help individuals accurately determine and comply with the stamp duty rate applicable to their specific gift deed transaction.
Payment of Stamp Duty: Who Pays?
The responsibility for paying stamp duty on gift deeds falls on the the giver of the gift along with other associated charges at the time of registration of the deed. Since any payment from the receiver of the gift would amount to paying money to the owner and bring the transaction into the area of a 'sale' under the provisions of the Transfer of Property Act, the doner pays the stamp duty and registration fee on gift deeds.
Legal Requirements For A Gift Deed
In India, to ensure it is valid and enforceable Gift Deeds must adhere to specific legal requirements. Firstly, the Gift Deed must be executed on non-judicial stamp paper of appropriate value as prescribed by the Stamp Act of the relevant state where the property is situated. This ensures that the document is legally binding and serves as evidence of the transfer of ownership. Additionally, the Gift Deed must be registered with the Sub-Registrar of Assurances. Registration lends legality and authenticity to the transfer, making it effective against third parties and preventing disputes regarding ownership in the future.
Further, the Gift Deed must contain essential details, including the identities of the donor and donee, a precise description of the property being gifted, and a clear statement of transfer without any consideration. Acceptance of the gift by the donee must also be explicitly mentioned in the deed. These elements contribute to the clarity and completeness of the document, minimizing the scope for ambiguity or misinterpretation. Compliance with these legal requirements not only safeguards the interests of both parties involved but also upholds the integrity of property transactions within the legal framework of India.
Advantages of Gift Deed
Gift Deeds offer several advantages for both the donor and the donee:
Transfer of Ownership: Gift Deeds facilitate the legal transfer of ownership of property from the donor to the donee without the need for monetary consideration. This allows individuals to gift assets to family members, friends, or charitable organizations as a gesture of goodwill or inheritance planning.
Tax Benefits: In India, gifts received from specified relatives, including parents, siblings, and spouses, are exempt from income tax under certain conditions. By utilising Gift Deeds, individuals can transfer assets to their loved ones while minimising tax liabilities for both the donor and the donee.
Avoidance of Probate: Unlike assets transferred through wills, gifts made via Gift Deeds do not require probate proceedings after the donor's demise. This expedites the transfer process and allows the donee to gain immediate possession and control of the gifted property.
Asset Protection: Gift Deeds can be used strategically as part of asset protection planning. By transferring assets to family members or trusts through Gift Deeds, individuals can shield their property from potential creditors or legal claims.
Family Harmony: Gift Deeds help foster harmony in the family by allowing individuals to distribute assets equally among family members which can prevent disputes and conflicts over inheritance after the donor's demise, promoting peace and understanding within the family unit.
Also Read: E-District Portal: Objectives, Benefits, Services & States Covered
In conclusion, understanding the regulations surrounding gift deeds in India is crucial for individuals engaging in property transfers. With varying stamp duty rates across different states and recent legislative changes impacting gift deed transactions, staying informed about the tax implications and legal requirements is essential.
Gift deeds offer a convenient way to transfer ownership of property or assets, providing advantages such as tax benefits, avoidance of probate, and asset protection. By adhering to legal requirements, such as executing the deed on appropriate stamp paper and registering it with the authorities, individuals can ensure the validity and enforceability of the transfer.
Overall, gift deeds play a vital role in estate planning and family wealth management, promoting financial security and harmony within families while navigating the complexities of property transfers in India.
explore further
Latest from Editorials
More from Publications
Resources
