Introduction
A gift deed is a legal transfer document that refers to the transfer of a movable or immovable property without any monetary or non-monetary exchange. Registration of a gift deed is an important process to legally validate the transfer of property and in the case of immovable property is also mandatory. This article will discuss the entire registration process of a gift deed and provide a deeper understanding of the taxation on property transferred via a gift deed.
Registration Process of Gift Deed in India
1. Draft a Gift Deed
The first step of registering a gift deed is preparing a gift deed that shows how a property whether movable or immovable is being transferred from the donor willingly and that the donee accepts the gift. While drafting a gift deed it is important to mention certain key clauses regarding taxation, conditions on the uses of gifts, etc.
2. Notarise the Gift Deed
The notarization of a gift deed is not a mandatory step for registration however it adds an extra layer of legal protection. To have a gift deed notarized, both the donor and the donee have to provide identification proof and then sign the document in the presence of a legal authority.
3. Pay Stamp Duty
The second step to registering a gift deed is paying stamp duty on it. It is a mandatory step for both movable and immovable properties. The stamp duty rates for a few states in India are defined below.
North India| State | Stamp Duty Rates for Gift Deeds (Approximate) |
|---|---|
| Uttar Pradesh | 4% to 6% of the property's market value |
| Punjab | 3% to 6% of the property's market value |
| Haryana | 3% to 6% of the property's market value |
| Rajasthan | 2% to 5% of the property's market value |
| Uttarakhand | 3% to 5% of the property's market value |
South India
| State | Stamp Duty Rates for Gift Deeds (Approximate) |
|---|---|
| Tamil Nadu | 1% to 9% of the property's market value |
| Karnataka | 3% to 5% of the property's market value |
| Telangana | 5% of the property's market value |
| Andhra Pradesh | 5% of the property's market value |
| Kerala | 0.5% to 14% of the property's market value |
East India
| State | Stamp Duty Rates for Gift Deeds (Approximate) |
|---|---|
| West Bengal | 5% of the property's market value |
| Bihar | 5% of the property's market value |
| Odisha | 5% of the property's market value |
| Jharkhand | 5% of the property's market value |
West India
| State | Stamp Duty Rates for Gift Deeds (Approximate) |
|---|---|
| Maharashtra | 2% to 3% of the property's market value |
| Gujarat | 3% to 8% of the property's market value |
| Goa | 5% of the property's market value |
4. Register the Gift Deed with the Sub-Registrar Office or Online State Portal
The final step of registering a gift deed includes the submission of the final deed along with other supporting documents listed below. Then these documents are verified and after paying the registration fee, a certified copy of the gift deed will be issued, the gift deed will be considered registered and applicable in a court of law. In case of an online registration, these documents can also be submitted on the respective state registration online portals. Some supporting documents required along with the original gift deed are as follows:
- The initial gift deed document
- Identification proof like an Aadhar Card or Passport
- PAN Cards of both the donor and the donee
- Supporting documents, such as a sale deed or Title Deed, validating the donor's ownership
- Passport-sized photographs
- Identification proof for witnesses
- Address proof for witnesses
Timeline for Gift Deed Registration
- Drafting the Gift Deed: This step typically takes around 3-7 days, depending on the complexity of the property transfer and the coordination between the donor, donee, and legal advisors.
- Notarization: Notarizing the gift deed can be done within a day or two once all parties involved are available to sign in the presence of a notary.
- Payment of Stamp Duty: The process of calculating and paying stamp duty can take 1-3 days, including the assessment of the property's value and the stamp duty rates applicable in the respective state.
- Registration at Sub-Registrar Office: This step may take 7-14 days as it involves submitting the gift deed and supporting documents, verification by the authorities, and payment of registration fees.
Associated Costs
- Stamp Duty Charges: Stamp duty rates vary by state and property type. For movable property, stamp duty might not apply; however, other taxes like GST (Goods and Services Tax) might be applicable based on the item's category and value.
- Registration Fees: The registration fee is calculated based on the property's value or a fixed amount set by the state government. For instance, in some states, the registration fee might be around 1% to 2% of the property's market value or a fixed amount, such as ₹5,000 to ₹20,000. This fee is payable at the time of registering the gift deed at the Sub-Registrar Office.
- Legal and Notary Charges: Costs for legal assistance and notarization vary based on the complexity of the deed and the legal advisor's fees. Notary charges can range from a few hundred rupees to a couple of thousand rupees, while legal consultation fees might vary significantly.
- Miscellaneous Expenses: These can include documentation charges, witness fees, and other incidental expenses incurred during the registration process.
Taxation on Gift Deed
In India, when you give or receive a gift like property or assets, there are specific rules about taxes based on the type of gift and its value. If you receive a gift from relatives that's worth more than ₹50,000, you don't have to pay taxes on the amount that exceeds this limit. However, if the gift comes from someone who isn't a relative and is valued over ₹50,000, you'll need to pay taxes based on the applicable income tax rates.
When it comes to property gifts, like land or buildings, exceeding ₹50,000 in value, there's something called stamp duty that you'll have to pay. The stamp duty value exceeding ₹50,000 is taxed at rates set by the state, which usually range from 2% to 9%. For movable assets such as cars or jewelry, if their value surpasses ₹50,000, they are also subject to income tax based on applicable rates.
So, to sum it up, whether it's a gift from relatives, non-relatives, immovable property, or movable property, the tax you pay depends on its value and the relationship between the giver and the receiver. This is further simplified in the table provided below.
| Gift Deed Type | Taxable Value | Tax Rate |
|---|---|---|
| Gifts from Relatives (Exceeding ₹50,000) | Value exceeding ₹50,000 | Exempt from tax |
| Gifts from Non-Relatives | The entire value of the gift | Applicable income tax slab rates |
| Gifts of Immovable Property (Exceeding ₹50,000) | Stamp duty value exceeding ₹50,000 | State-specific stamp duty rates (2% to 9%) |
| Gifts of Movable Property (Exceeding ₹50,000) | Value exceeding ₹50,000 | Applicable income tax slab rates |
Conclusion
Ultimately, registering a gift deed is very important to make it legally valid in court. This step helps prevent future conflicts or disputes. The registration process involves four main steps: creating the gift deed, getting it notarized for legal validation, paying stamp duty, and officially registering it at the local sub-registrar office or state government portal.
In India, the tax implications of gifting depend on various factors. The relationship between the donor and recipient (donee) and the type of property (immovable or movable) determine the taxation rules. It's important for individuals involved in gifting to understand these factors to handle the tax implications effectively.