Planning to Gift Your Property? Consider These Points

The joy of gifting is immense. But, there could be financial implications on doing so, especially if you are planning to gift a property. Here are certain points that must be considered before you decide to confer upon another the ownership of your property through a gift deed.

Do I have to pay taxes if I gift my property to a relative?

The answer is no. Neither you nor the relative will be liable to pay taxes in a case the transfer takes place through a gift deed. However, you will have to pay stamp duty and registration charges on the transaction to provide it legal validity.

States have different laws over the issue. In Rajasthan, for example, no stamp duty has to be paid if a husband is gifting an immovable property to his wife. In case the transfer is in the name of other relatives such as the father, the mother, the son, the sister, the daughter-in-law, the grandson or the daughter, 2.5 per cent of the property value has to be paid as stamp duty.

If you are transferring the property — which has a value of over Rs 50,000 — to someone who is not your relative, the recipient will have to pay taxes during that financial year under the head income from other sources.

What if you want to gift the cash gained from the sale of the property?

In such a case, the recipient might have to pay taxes if he or she is not your relative. Under the tax law, if one receives a gift worth Rs 50,000 in one financial year, one will be liable to pay taxes under the head income from other sources. If the proceeds are transferred to, say, your son's account, he will not be liable to pay any taxes.   

Also read: Can I Buy A House With My Friend?

What if you gift your assets during your lifetime?

In case you have parted ways with your assets through a registered gift deed, the change of ownership takes place immediately after. Mind you, a gift deed becomes legally binding only after it has been registered paying a stamp duty for the transaction during your lifetime and two witnesses have attested it. According to the provisions of the Registration Act, 1908, the donor must get the deed registered within four months of executing the same.  If you thought a gift deed transferred your property to, say, an NGO, it can immediately claim the ownership of the property.

Can you take a gift back?

The answer is yes, but here is a caveat. According to Section 126 of the Transfer of Property Act, 1982, unless the donor specifies in the registered contract that he keeps with himself the rights to take back the gift, revoking the deal will not be possible. You could also keep partial rights over the gift. For instance, you transfer through a gift deed two plots to a distant relative at the same time keeping your right to revoke the transfer over the second plot. At a later stage, you will not be able to claim ownership over the first plot.

Also read: Interpreting The SC Order On Women's Right To Ancestral Property

What if you want to gift your property after your demise?

Despite your willingness to gift your assets, you may not like to part ways with it during your lifetime. To ensure that, the transfer must be done through a will, and not a gift deed. When you create a will, you also have the liberty to make changes in it as and when you deem fit, something you do not enjoy if property transfer has taken place through a gift deed.

Who pays the dues after a property is gifted?

Under the provisions of the property transfer law, after an asset is entirely conferred upon a new person through a gift deed, the recipient of the gift will be liable to pay all pending dues. Suppose you uncle gifted you his flat, for which he is liable to pay Rs 50,000 as water, electricity and utility bills. The responsibility of paying the dues now rests with you.

Do you still have to pay a stamp duty if you are gifting your assets to a charitable trust?

Depending on the prevailing law in your state and the manner in which the deed is created, the stamp duty might be waived or reduced if you are gifting your assets to a charitable organisation. However, in case you are gifting your property to a non-governmental organisation (NGO) , you will not have to pay stamp duty. Also, keep in mind that not all NGOs are permitted to accept gifts of land and property.

Can you gift a property you expect to own in future?

Such a contract, if made, is termed void according to the law.

What is the recipient does not accept the gift?

To make a gift deed legally valid, the beneficiary has to accept it in the lifetime of the donor. In case he fails to do so, the contract would turn void and the ownership of the property would lie with the donor.