‘Gifting’ is a popular mode of transferring the ownership and possession of one’s property in favour of family or friend or just about anyone you decide to shower your fortune on.
For the gift to be perfectly valid in the eyes of law, the property must be transferred voluntarily, without any consideration, and must be accepted by the donee (the person receiving the gift of property). All this has to happen during the lifetime of the donor or the person gifting his/her property.
A donor can only gift that property which he/she already owns at the time of making the gift. It basically means that property which is not yet acquired or is only planned to be bought in the future cannot be gifted.
Also, in case you plan to gift an undivided share in a property which you jointly own with one or more persons, the Gift Deed should clearly mention the percentage of that undivided share you plan to gift.
Coparcenary or self-acquired
Now, that you have decided to be generous, it is important to determine whether the property you are gifting is coparcenary or self-acquired. In simple terms, coparcenary property refers to undivided property acquired or inherited by the donor from ancestors under the Hindu Law of Succession and Inheritance. On the other hand, the self-acquired property, as the name suggests, means the asset you have bought and built with your own money.
For gifting away a self-acquired property, you obviously wouldn’t require a prior consentfrom anyone. After all it’s your property and you can do whatever you wish to. However, if your case falls under the latter category, you will have to obtain prior consent from all other coparceners (i.e. other family members who also have an undivided share in the same immovable property which was acquired or inherited from a common ancestor). A gift of an undivided share in a coparcenary property would be valid only if all coparceners give their consent.
No liabilities please!
The gift shouldn’t come with a price. Gifting someone a liability is not a good idea unless the person doesn’t mind it. So, it would be only fair if you disclose to the donee any debts or liabilities that might be attached to the property. This is a crucial disclosure which would help him/her to decide whether they want the gift or not.
Creating a Gift Deed
Under Transfer of Property Act, 1882, a gift of an immovable property is considered valid only if the transfer of such property is made legally binding. This essentially means getting entering into a gift deed signed by both parties and attested by at least two witnesses. Like a sale deed, a Gift deed is also meant to contain details of the property, the transferor and recipient.
Please note that oral statements or mere delivery of possession of an immovable property without executing a valid written instrument are not enforceable in law. It also does not transfer the title of ownership in the favour of the donee.
Making the transfer valid
A Gift Deed needs mandatory registration in order to gain validity in law. Stamp duty and registration fee have to be paid to register a gift deed. The rate of stamp duty payable on a Gift Deed is same as for Sale or Conveyance Deed. A registered Gift Deed would also allow the recipient to further transfer the property.
Once the registration is done, the donee must apply for mutation of property in his/her favour. Mutation of property means recording the change of title in official government records. This would be required to transfer utility connections in the name of the recipient.
‘Once given not to be taken back’
On registering the Gift Deed, the donor loses all claims to the property. He/she can neither revoke the gift nor can seek or demand monetary compensation. However, Section 126 of The Transfer of Property Act, 1882, provides for situations wherein a gift deed may be revoked by the donor. For instance, the property gifted to the recipient to reside on the condition that upon his/her death, the property will get transferred back to the donor or his/her heirs. But such clauses need to be specifically mentioned in the gift deed.
The rigidity of a Gift Deed is in stark contrast to writing a Will where an individual can revoke, amend and replace it any number of times during his lifetime.