DEFINITION OF GIFT
Gift is defined under section 122 of the Transfer of Property Act, 1882 (“TPA” or the “Act”). Gift is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. A gift made include land, actionable claims, mortgages, or goods. The transfer of actionable claims like shares, insurance policies by gift deed is valid after compliance with TPA.
CHARACTERISTICS OF A GIFT
The essential characteristics that constitute a valid gift are: (i) the absence of consideration; (ii) the donor; (iii) donee; (iv) subject matter; (v) transfer; and (vi) acceptance. Hereunder are basic characists of a gift:
No consideration: The intention behind any gift is that it is made out of love and affection or spiritual benefit. The concept of gift is based on purely gratuitous consideration. Consideration has the same meaning in this Act as defined in Indian Contract Act. It has been stated by the Supreme Court that the basic essential of any gift is that it should be made by the donor ‘without consideration’. Therefore, there must be no monetary consideration, however minimal, between the involved parties.
Capacity of Donor: The only two qualifications for making a gift deed by a person are soundness of mind and majority. The donor while making a gift deed must be in his full legal capacity. The donor must not be insane but a mere weakness of the intellect would not be sufficient to invalidate the gift if he/she can comprehend the transaction. He must be aware of the contents of the instruments and its effect. Only a sui juris person can make such a deed. Any deed made by a minor is void as a minor is incompetent to contract. A person can make a gift deed after attaining the age of eighteen years. In case, the Wards Act governs a person, the age of majority will be twenty-one years.
Donee: It is not necessary for the donee to be competent person. A Donee must be in existence while the gift is being made and can be made to two or more persons. The Act does not prohibit transfer of property to a minor, a lunatic, and a child in the womb of the mother. It includes jurist persons, such as companies, firms, institutions, and a religious deity
Existing property: Any gift made must be of an existing property and capable of being transferred. It must be a tangible property. Any gift of comprising of both existing and future property is void. Any share of property that has been obtained after partition of a joint family can be gifted
Transfer of Ownership: To transfer the rights over the subject matter, the donor must be an absolute owner of it. Only an absolute owner of the property has full and unfettered right to transfer and alienate the property. It is mandatory for the donor to completely relinquish all his rights and interest over the subject matter of the gift deed. He must not have any possession, ownership, and dominion over the property. Ownership will be created in the favour of the donee after the donor has renounced all his rights over the subject matter.
Acceptance: It is imperative that the acceptance of such gift must be made during the lifetime of the donor and when he is in full capacity of giving it. It can be expressed or implied. If the donee dies before acceptance, the gift is void. Where a gift is in the form of two or more separate and independent transfers to the same person of several things, the donee is at liberty to accept one of them and refuse the others, although the former may be beneficial and the latter onerous. Acceptance of a gift can be done by different modes including taking the property or being in possession of the gift deed. Delivery of possession is an essential condition for the validity of the gift. It is well settled that for proving the acceptance of a gift, it is not required to be shown that possession of the immovable property gifted under the deed has been delivered as long as it is shown that the presents under the gift was accepted. A donee can refuse an onerous or a gift of non- beneficial property
Voluntary: The deed must be made by the donor’s free consent and not under compulsion. Any gift deed that made been made under coercion, undue influence, fraud, misrepresentation suspicion, or mistake is void. It will stand revoked under these circumstances. In such cases, it is not open to the parties to unilaterally cancel the contract. The aggrieved party is entitled to have it avoided through a Court of Law by establishing undue influence, fraud, coercion, or misrepresentation.Delivery of Possession
Delivery of Possession: It is not compulsory to deliver the possession of a property as soon as the gift deed is executed. The donor can enjoy few rights as mentioned in the gift deed. The question of deliver of possession being a parameter to validate a gift deed arose in a recent case. In this case, the donor being the mother executed a gift deed in favour of her daughter but continued to receive rent from the property. The Supreme Court has stated that the donor can retain the property after the gift deed has been executed. The retention of benefits from the property does not affect the legality of the gift deed. Hence, conditional gifts are legally valid in the eyes of the law. The court has done away with the requirement of delivery of possession. The court has held that Section 123 of Transfer of Property Act would supersede Hindu Law when the delivery of possession is required to the donee as transfer of possession is a condition under the Hindu Law for a valid gift.
STAMP DUTY ON GIFT DEED
Every state in India has a different and prescribed percentage of stamp duty that has to be imposed during the time of registration of a gift deed. The stamp duty on a gift deed is usually lower than that of a sale deed but is calculated as a conveyance that of a sale deed. The criteria for imposing a stamp duty on a gift deed vary from state to state. The parameters also change. e.g. it stands at 5% in Andhra Pradesh. However, 5% of stamp duty is imposed on a property outside municipal boundary is 5 % and 7% within a municipal boundary. In Delhi, it is different for males and females and is imposed as 5 % and 3% respectively. In West Bengal, the stamp duty for sale or conveyance deed (includes gift, mortgage and lease deed) is 5% of the property’s market value in Panchayat areas, and 6% of market value in municipal areas. If the recipient is a family member, then only 0.5% of the market value of the property has to be paid as stamp duty.
In 2014, the Government of Punjab waived off stamp duty on a gift deed made between blood relations including mother father, husband, wife, children, grandchildren, brother, and sister. Additionally, there are no registration fees charged on the same.
REGISTRATION OF GIFT DEED
Registration of a movable property is not compulsory; it gets completed on the delivery of possession. In case of an immovable property, there must be a written instrument in place that is compulsory to be registered. Any deed that is made for an immovable property is to be registered under the Indian Registration Act, 1908. It must be signed by the donor and attested by two witnesses, this is irrespective of the value of the property. There cannot be any transfer of any rights, title, and interest if the deed goes unregistered. Without registration it can’t be read as evidence in court. It is also considered bad in law. After signatures and attestation, a gift deed is to be presented in the office of the sub – registrar within whose district the portion of the property lies. A period of four months is given for the registration is the deed. However, the deed will become operative from the date of its execution and not registration. The benefit of registration of a deed of gift is that it can be received in evidence without examining one of the attestors if the person who has executed the deed of gift has not specifically denied its execution.
REVOCATION AND CANCELLATION
A gift once made can’t be revoked. A deed of gift can’t be cancelled at the mere will of the donor; rather the decree of court is required for cancellation of any gift made under Muslim Law. The same applies in Hindu Law. It can only revoked by a court order by proving that it was made under undue influence or coercion, if it is a contract and it later rescinded or, if it is a conditional gift, and if the parties have agreed to a specific event that would cause revocation.
In Tila Bewa v Mena Bewa, it was held, “The well settled legal position, based on authorities, is that a gift subject to the condition that the donee should maintain the donor cannot be revoked under section 126 of the Transfer of Property Act for failure of the donee to maintain the donor, firstly for the reason that there is no agreement between the parties that the gift could be either suspended or revoked; and secondly, this should not depend on the will of the donor; again, the failure of the donee to maintain the donor as undertaken by her in the document is not a contingency which should defeat the gift; all that could be said is that the default of the donee in that behalf amounts to want of consideration.”
A gift cannot be revoked or rescinded unilaterally on grounds on which a contract can be avoided. It can be avoided on the aforesaid grounds through a Court of Law.
In the case of Khursida Begum Vs Mohammad Farooq, a gift of property, which is capable of division, is irregular, but can, be perfected and rendered valid by subsequent partition or delivery. Exceptions to the rule are: where the gift is made by one co-heir to the other; where the gift is of share in a zemindari or taluka; where gift is of a share in freehold property in a large commercial town, and where gift is of share in a land company.
GIFT Vs WILL
Any movable or immovable property can be transferred within blood relations without any consideration via a gift deed or a Will. The advantages of having a gift deed is that it can be executed during the lifetime of a donor, unlike a Will which comes into effect only after the death of the testator. Gift deeds are no subject to taxation, they have a percentage of stamp duty attached to them varying from state to state. Gifts deeds are required to be registered for them to come into effect also making them less liable to litigation. A testator can change his Will several times during his lifetime using a codicil or any amending document.
No stamp duty is charged on registration of a Will only a nominal registration fees. However, a Will is not a compulsory registerable document and it is the choice of the testator regarding its registration.
Readers of this article could contact Evaluer and have a gift deed drafted for their family property related matters.
Contribution:
This article was contributed by Miss Avneet Brar final year law student. Views discussed are personal.