Stamp duty on gift deed property a quick guide

Most people enjoy receiving presents. It could be a book, clothing, or the latest smartphone. It could even be property. But the gift of property is not quite as simple as the other gifts. For starters, you would have to draft a gift deed. If any stamp duty applies, using a stamp duty calculator could help you figure out the actual tax liability.

What is a Gift Deed?

A gift deed is a special type of document. Suppose the gift in question is an apartment in a residential complex. Here, the gift deed acts as a record that the donor has given the apartment as a gift to the donee. Here, the donor is the one who is giving the gift. The donee is the person who receives this gift.

The gift deed works as a documentary record, which can come in handy in the future. For this reason, there are certain things that the property gift deed must mention:

  • The donor is gifting the property voluntarily.
  • There is no coercion involved.
  • There will be no price to pay in return for this gift.
  • The donor is solvent—that is, not bankrupt.

The property must already be registered in the name of the donor. The gift deed should also list the following:

  • Names and addresses of donor and donee
  • Relationship between the two parties
  • Reason for creation of the gift deed

The donee must then sign on the gift deed to accept the gift. But this acceptance should take place while the donor is still alive. If the donor passes away before the donee signs the deed, the gift deed will be deemed invalid.

The next step is to register the property gift deed under the Transfer of Property Act. Only then will the ownership pass to the donee.

What is Stamp Duty on Gift Deed Property?

At the time of registration, the appropriate stamp duty will be payable.

Stamp duty is a tax that applies when you transfer ownership of property from one party to another. How much do you have to pay? That generally depends on the value of the property at the time of registration. To ascertain the value, you should contact an approved valuation expert. They will inspect the property thoroughly before stating its actual value.

Once you know what the property is worth, take the help of a stamp duty calculator. This will help you to assess the actual amount payable. Keep in mind, however, that the stamp duty applicable varies from state to state. So, the stamp duty on a house in Mumbai could differ from the duties on similar houses in Kolkata and Chennai even if they have the same value. So, make sure to check the regulations in the respective state.

If the gift is between close relatives, you could enjoy concessions in some states. The definition of close relatives may vary. But typically, it includes gifts from parent to child, from grandparents to grandchildren, from one spouse to another, and so on.

From the income tax point of view, the gift of property between certain close relatives is tax-exempt. The applicable relations that are exempt are outlined in the Income Tax Act. If the gift is not between such specified relations, the tax implications may be different. Generally, gifts whose value exceeds Rs 50,000 in a year are taxable in the hands of the donee.

Any income that the donee later earns from the gift deed property will be taxable in their hands.

Bottom Line

Getting a property by gift deed is certainly great. But you could still plan to buy your own home. Go through the different options available to find the best home loan in India. Depending on your loan eligibility, you could get loans of up to Rs. 5 crore through lenders.

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