Section 122 of the Transfer of Property Act, which was enacted in 1882, clearly defines the term ‘gift’. In the spirit of voluntary donation, any property, whether moveable or immovable, can be given as a gift to a known person. The beneficiary accepts the gift himself or someone who inherits the property on his behalf. In accordance with the TPA, a gift can consist of mortgages, land, actionable claims, or valuable goods. After compliance with the Transfer of Property law, actionable claims, such as insurance policies, shares, bonds, etc., can be donated through gift deeds.
An ideal gift should have the following characteristics
A genuine gift must have the following characteristics: ‘What are the highlighted characteristics that define a genuine gift?’
Gifts must include:
- A lack of contemplation
- An individual who donates
- The gift itself or the subject matter
- The act of transferring
We have defined each element concerning a gift in the following section of the article.
The true intention of the donor should be based on affection when gifting, otherwise, the gift should be given to extend some spiritual upliftment. In the Indian Contract Act, this gratuitous mindset has been vividly defined as the basis for gifting something. In this way, the Supreme Court ruled that any financial consideration, however minimal, from the donor ruins the basic essence of a gift.
Donor: Only two basic criteria are considered regarding the capacity of an owner who wishes to gift his property: mental stability and majority. It is essential that you are in your full rational capacity when gifting property to a blood relative. If the donor is able to comprehend the property transfer on his own, the Court will approve the gifting procedure. A lack of intellect alone is not sufficient to stop the gifting process. In order to assess the consequences of the transfer of a property, valid instruments must be legally implemented. Upon reaching 18 years of age, an individual can issue a gift deed.
A recipient’s eligibility to inherit property is not measured by law. When the gift deed is drawn, the recipient must be alive. In a gift deed, it does not necessarily have to be one individual; it may even include two or more candidates who are related by blood. Property may be gifted to lunatics, minors, or unborn children under the TPA law. A gift can also be made to a company, an institution, or a religious organization.
Gifts that are assigned to someone should be assets that the owner can readily donate without any obligation. According to the Act, the property must be tangible. Gift deeds that combine future potential property with existing assets are considered void by law. If an Indian joint family is divided, any part of the property that remains can be gifted to a blood relative.
All tangible assets can be gifted to blood relatives if the absolute proprietor generates a gift deed. A property owner can only delegate ownership rights to someone if he is the absolute landlord. In the absence of this condition, the registration of gift deed is declared void by the jurisdiction. It is not possible for the court to sanction a partial donation deed that was agreed on on personal terms between the owner and the recipient.
The acceptance of any gift must be confirmed while the donor is still alive and has the mental capacity to make a rational judgment. This statement may be expressed or implied by the recipient. If the recipient dies before accepting the gift, the gift cannot be made. Gifts can be refused by the recipient if they are entitled to inherit two or more tangible assets; this is up to them. Possessing the gift deed generated by the proprietor or taking control of the property expresses acceptance. Proof of validation of the gifting must be provided. Recipients have the right to decline onerous or nonbeneficial assets.
Inheriting a gift makes the recipient liable for taxes?
Usually, the person making the gift is not required to pay taxes on the assets he renounces. There are occasions, however, when the beneficiaries of the trust are taxed according to the IT Act, 1961. 1961. The income from ancillary sources is taxed under the section ‘Income from ancillary sources’ of the tax code. As per Section 12AA of the Income Tax law, gifts can be exempted from taxation if they are gifted by relatives at the time of marriage or by relatives who inherit property rights in their estates through inheritance or will. This is stated in Section 12AA of the Income Tax law.
Beneficiaries can include siblings, spouses, spouses’ siblings, etc. Besides these things, a property inherited by a person is taxable when the stamp duty amount of such an asset gained without contemplation ultimately exceeds $50,000. It is necessary for the proprietor or someone acting on his behalf to register and attest the transfer order for any immovable property. The signatures of at least two witnesses should also be included. When a property is gifted, stamp duty is calculated using its market value. When registering the gift deed, the donor must pay this calculated amount.
Nevertheless, you should note that these laws differ from state to state when it comes to gifting properties to your blood relatives. In Rajasthan, you will usually have to pay stamp duty of 2.5% of the value of your immovable property when you gift it to someone related by blood.
The practice of gifting property to loved ones is common in India. There are, however, certain rules you must follow with due respect when processing a gift deed in conjunction with legal assistance. In contrast to a sale deed, beneficiaries do not have to pay a definite sum for the benefits they receive.