Gift Deed for Property: Process, Stamp Duty & Tax

A gift deed is a legal document used to transfer property ownership from one person (donor) to another (donee) without any monetary consideration. It is commonly used for transferring property within families. This guide covers the complete process, stamp duty, tax implications, and legal requirements.

What is a Gift Deed?

A gift deed is governed by Section 122 of the Transfer of Property Act, 1882. For a gift of immovable property to be valid:

• It must be in writing (registered document)
• It must be signed by the donor
• It must be attested by at least two witnesses
• It must be registered at the Sub-Registrar's office
• The donee must accept the gift during the donor's lifetime

Key point: Unlike a sale deed, a gift deed involves no monetary exchange. The transfer is voluntary and out of love, affection, or goodwill.

Gift Deed: Blood Relatives vs Others

The tax and stamp duty treatment differs significantly based on the relationship between donor and donee.

Gifts to Blood Relatives (Specified Relatives)

Under Section 56(2) of the Income Tax Act, gifts received from specified relatives are fully exempt from income tax, regardless of value.

Specified relatives include:

• Spouse
• Brother or sister
• Brother or sister of spouse
• Brother or sister of either parent
• Any lineal ascendant or descendant (parents, grandparents, children, grandchildren)
• Spouse of any of the above

Gifts to Non-Relatives

• If the property's stamp duty value exceeds ₹50,000, the entire amount is taxable as "Income from Other Sources" in the hands of the donee
• The donee must pay income tax at their applicable slab rate

Stamp Duty on Gift Deeds (State-wise)

Stamp duty varies significantly by state and relationship:

Note: Rates change periodically. Verify current rates at your state's IGR (Inspector General of Registration) website.

Documents Required

• Gift deed (drafted on stamp paper of appropriate value)
• Property documents — original sale deed, title deed, or mother deed
• Encumbrance certificate (last 13–30 years)
• ID proof of donor and donee — Aadhaar card, PAN card
• Address proof of both parties
• Property tax receipts (latest)
• Passport-size photographs of donor, donee, and witnesses (2 each)
• Proof of relationship — for claiming concessional stamp duty (birth certificate, marriage certificate)
• NOC from housing society (if applicable)
• Two witnesses with ID proof

Step-by-Step Registration Process

Step 1: Draft the Gift Deed

• Engage a lawyer to draft the gift deed
• The deed must clearly describe the property (survey number, area, boundaries, address)
• Include details of donor, donee, relationship, and the gift's voluntary nature

Step 2: Purchase Stamp Paper / E-Stamp

• Buy stamp paper of the required value based on state stamp duty rates
• E-stamps are available through SHCIL or state portals

Step 3: Execute the Gift Deed

• The donor signs the deed on the stamp paper
• Two witnesses sign the deed
• The donee signs to indicate acceptance

Step 4: Book Appointment at Sub-Registrar's Office

• Visit the Sub-Registrar's office having jurisdiction over the property location
• Many states offer online appointment booking

Step 5: Registration at Sub-Registrar's Office

• Both donor and donee must be present with original ID proofs
• Two witnesses must be present
• Submit the gift deed along with all supporting documents
• Pay registration fee (typically 1% of property value, subject to a cap)
• Biometric verification is done

Step 6: Collect Registered Deed

• The Sub-Registrar registers the deed and returns the original
• Registration number is assigned
• Collect the registered deed (same day or within 2–3 days)

Step 7: Mutation of Property Records

• Apply for mutation (name change) in the municipal/revenue records
• Submit the registered gift deed as proof

Fees Summary

Tax Implications

For the Donor

• No income tax liability on making a gift
• No capital gains tax (since there is no "sale")
• However: If the gift is to a spouse or minor child, the clubbing provisions (Section 64) apply — income from the gifted property will be added to the donor's income

For the Donee

• From specified relatives: Fully exempt from income tax
• From others (value > ₹50,000): Taxable as "Income from Other Sources"
• Capital gains on future sale: The donee's cost of acquisition is the donor's original cost (not the market value at the time of gift)
• Holding period: Includes the donor's holding period for determining long-term vs short-term capital gains

Can a Gift Deed be Revoked?

Under Section 126 of the Transfer of Property Act:

• A gift deed can be revoked if:

  • The deed explicitly includes a revocation clause agreed upon by both parties
  • The gift was obtained through fraud, coercion, or undue influence
  • The donor was of unsound mind at the time of gifting

• A gift deed cannot be revoked if:

  • It is a registered deed without a revocation clause
  • The donee has already accepted the gift
  • It was made voluntarily with full consent

Practical advice: Once a gift deed is registered, revocation is very difficult. Think carefully before executing one.

Important Tips

1. Always register the gift deed — an unregistered gift of immovable property is legally void
2. Keep relationship proof handy for concessional stamp duty
3. Get an encumbrance certificate to ensure the property has no pending liabilities
4. Consider tax implications — especially clubbing provisions for gifts to spouse/minor
5. Include clear property description — ambiguity in property details can lead to disputes

FAQs

Is stamp duty payable on gift deeds to family members?

Yes, but most states offer concessional rates for gifts between blood relatives. The concession varies significantly by state.

Can I gift property to my wife to save tax?

You can gift property, but income from the gifted property (rent, etc.) will be clubbed with your income under Section 64 of the Income Tax Act.

Is a gift deed better than a will for property transfer?

A gift deed transfers ownership immediately during your lifetime. A will takes effect only after death. A gift deed is irrevocable (mostly), while a will can be changed anytime. Choose based on your situation.

Can NRIs execute a gift deed in India?

Yes, NRIs can gift immovable property in India. The donor can execute a Power of Attorney if unable to be physically present for registration.

What is the difference between a gift deed and a sale deed?

A gift deed involves no monetary consideration — the transfer is free. A sale deed involves payment of the agreed price. Both must be registered.

Can a gift deed be challenged in court?

Yes, a gift deed can be challenged on grounds of fraud, coercion, undue influence, or if the donor was mentally incapacitated. Legal heirs can challenge if they believe their rights are affected.

Do I need to pay capital gains tax on gifting property?

No capital gains tax is payable by the donor at the time of gifting. However, when the donee eventually sells the property, capital gains tax applies based on the donor's original purchase cost.

Related Guides

• How to Register a Will
• Succession Certificate: How to Apply
• Legal Heir Certificate
• Rental Agreement Registration

Disclaimer: CitizenNest is an independent platform and is not affiliated with any government body. Information is compiled from official sources for educational purposes. Consult a lawyer and chartered accountant for property transfer and tax planning.