Gifting property in India: Legal rules, taxes and everything you should know

Gifting property in India is often seen as an emotional and cultural act, rooted in family ties and tradition. But beyond sentiment, a property gift is a serious legal transaction that must follow strict rules.

Missing a step can lead to disputes, tax trouble or even an invalid transfer.Whether the gift is being made to a spouse, child, sibling or another person, the law requires proper documentation, registration and tax compliance. Here is a clear and simple guide covering the rules, processes, taxes and key terms you need to keep in mind while gifting a property.

What is a gift deed and why it matters

A gift deed is a legal document that allows a person to transfer ownership of movable or immovable property to another person without receiving money in return.

Once registered, the transfer takes effect immediately. This is what sets a gift deed apart from a Will, which becomes effective only after the death of the owner.The person giving the property is called the donor, while the recipient is known as the donee. Registering a gift deed reduces the risk of future property disputes, especially in inheritance-related cases.

Types of property that can be gifted

A gift deed can be used to transfer both movable and immovable property.

Immovable property includes land, houses, flats and buildings attached to the earth. Movable property covers assets such as jewellery, vehicles, shares, bonds, paintings and other valuables.However, certain conditions must be met. The donor must be the sole legal owner, the property must already exist, and it must be transferable. Future or contingent properties cannot be gifted, as per reports.

Legal framework under Indian law

The Transfer of Property Act, 1882, governs gift deeds in India.

Under the Act, a gift must be made voluntarily, without any financial consideration, and must be accepted by the donee during the lifetime of the donor. The law also makes registration compulsory for immovable property under the Indian Registration Act, 1908.As per the Act, a gift deed is valid only if the donor has a clear title and is not under coercion or undue influence. Once registered, ownership passes to the donee immediately.

Key rules to keep in mind while gifting property

There are several non-negotiable rules.

How to draft and register a gift deed

The drafting process begins with mentioning the date and place of execution, followed by full details of the donor and donee. Complete property details, including address and boundaries, must be included. After drafting, the deed is printed on stamp paper of appropriate value.Both parties must then visit the registrar or sub-registrar’s office along with two witnesses.

After verification and signatures, a registration certificate is issued, confirming the legal transfer.

Stamp duty and registration charges

Stamp duty on a gift deed depends on the property’s market value, the relationship between donor and donee, and state-specific rules. Many states offer concessional rates for gifts between close relatives. Registration charges are usually around 1% of the property value.States like Telangana charge as little as 0.5% stamp duty, while states such as Tamil Nadu and Delhi levy higher rates. Stamp duty must be paid through e-stamping, stamp paper or franking, depending on local rules.

Tax implications of gifting property

Gift tax in India is governed by the Income Tax Act. While the old Gift Tax Act was abolished, gifts are now taxed under “Income from Other Sources”.If the total value of gifts from non-relatives exceeds Rs 50,000 in a financial year, the entire amount becomes taxable. In case of immovable property, if the stamp duty value exceeds Rs 50,000, the stamp duty value or the difference amount may be taxed.

Exemptions you should know about

Not all gifts attract tax. Gifts from specified relatives such as spouses, parents, siblings and lineal descendants are fully exempt. Gifts received on the occasion of marriage, through inheritance or under a Will are also tax-free, regardless of value, as per reports.Additionally, gifts received from local authorities, registered charitable institutions or in contemplation of death are exempt from tax.Declaring gift tax and stamp duty valuation issuesTaxable gifts must be declared in the income tax return under “Income from Other Sources”.

The taxable value is added to total income and taxed as per the applicable slab.Stamp duty value plays a crucial role in property gifts. If there is a difference between agreement date and registration date, the stamp duty value on the agreement date may be used, subject to conditions. Taxpayers can challenge excessive stamp duty valuations through a Valuation Officer, and a 10% tolerance limit is allowed under Section 56(2)(x).

Can a gift deed be cancelled?

Once executed and accepted, a gift deed is generally irrevocable. However, Section 126 of the Transfer of Property Act allows revocation under specific conditions. These include mutual agreement on a contingent event or situations involving fraud, misrepresentation or coercion.The donor cannot cancel the deed at will. Any revocation clause must be clearly mentioned in the deed at the time of execution to avoid disputes later, as per reports.Gifting property is not just a family decision but a legal and financial one. Understanding the rules around gift deeds, stamp duty and taxation ensures the transfer is smooth, valid and dispute-free. Proper documentation and timely compliance remain the key to a trouble-free property gift.