Gifting property to a family member or a loved one is a common practice in many countries, including India. However, such transfers are not entirely free from legal formalities and costs. One of the primary costs involved in gifting property is stamp duty. This article provides a comprehensive overview of stamp duty on gift of property, its calculation, exemptions, and the process involved in different states of India.

Table of Contents

1. What is Stamp Duty?
2. What is a Gift Deed?
3. Stamp Duty on Gift Deed: An Overview
4. Calculation of Stamp Duty on Gift of Property
5. Exemptions and Concessions on Stamp Duty
6. Stamp Duty Rates for Gift of Property in Different States
7. Registration Process for Gift Deed
8. Important Points to Consider While Gifting Property
9. Tax Implications on Gift of Property
10. Conclusion

1. What is Stamp Duty?

Stamp duty is a tax levied by the government on legal documents, typically in property transactions. It serves as legal evidence of the ownership or transfer of a property. The amount of stamp duty varies depending on the type of document, the value of the property, and the state where the property is located. It is mandatory to pay stamp duty to make the transfer legally valid and enforceable in a court of law.

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2. What is a Gift Deed?

A gift deed is a legal document used to transfer ownership of property from one person (the donor) to another (the donee) without any exchange of money. The transfer is made voluntarily and without any consideration, meaning it is done out of love, affection, or goodwill. For the gift deed to be valid, it must be registered with the appropriate authority, and stamp duty must be paid as per the laws of the state in which the property is located.

3. Stamp Duty on Gift Deed: An Overview

When gifting property, the donor needs to execute a gift deed, and stamp duty must be paid on this document. Stamp duty on a gift of property varies from state to state in India and is generally a percentage of the property’s market value. The stamp duty rates can differ based on the type of property (residential, commercial, or agricultural) and the relationship between the donor and the donee.

4. Calculation of Stamp Duty on Gift of Property

The calculation of stamp duty on the gift of property typically depends on the following factors:

• Market Value of the Property: Stamp duty is often calculated based on the property’s current market value as assessed by the government.
• Type of Property: Different rates may apply for residential, commercial, and agricultural properties.
• Location of the Property: The property’s location (urban or rural) can affect the stamp duty rate.
• Relationship Between Donor and Donee: In some states, stamp duty rates are lower when the property is gifted to a close relative, such as a spouse, child, parent, or sibling.

For example, if you gift a property valued at INR 50 lakh, and the stamp duty rate is 5%, you would need to pay INR 2.5 lakh as stamp duty. However, if the donee is a close family member, the rate may be lower, resulting in reduced stamp duty.

5. Exemptions and Concessions on Stamp Duty

Several states in India provide exemptions or concessions on stamp duty when someone gifts property to a close relative. These exemptions aim to encourage the transfer of property within families. Some common exemptions include:

• Gifts to Close Relatives: Many states offer a lower stamp duty rate or full exemption when the property is gifted to a spouse, children, parents, or siblings.
• Gifts for Religious or Charitable Purposes: In certain states, gifting property to religious or charitable organizations may attract lower stamp duty or exemption.
• Gifts in Rural Areas: Some states provide concessions on stamp duty for properties located in rural areas.

It is essential to check the specific rules and exemptions applicable in the state where the property is located, as these can vary significantly.

6. Stamp Duty Rates for Gift of Property in Different States

The stamp duty rates on the gift of property differ from state to state. Here is an overview of the stamp duty rates for some key states in India:

• Maharashtra: For gift deeds involving close relatives, the stamp duty is 3% of the property’s market value.
• Delhi: Stamp duty is 4% for men and 3% for women when gifting property to blood relatives.
• Karnataka: The stamp duty for gift deeds involving blood relatives is 2% of the property’s market value.
• Tamil Nadu: The stamp duty on a gift deed is 7% of the property’s market value.
• Uttar Pradesh: Stamp duty is 7% of the property’s market value, with concessions for transfers to family members.
• West Bengal: For gift deeds involving close family members, the stamp duty is 0.5% of the property’s market value.

These rates are subject to change, and it is advisable to consult the local sub-registrar office or a legal expert for the most up-to-date information.

7. Registration Process for Gift Deed

The process of registering a gift deed involves several steps:

1. Drafting the Gift Deed: The donor must draft the gift deed with all the necessary details. Including the description of the property, the donor and donee’s names, the relationship between them, and the declaration of a gift without consideration.
2. Valuation of Property: The property must be valued by the concerned authority to calculate the applicable stamp duty.
3. Payment of Stamp Duty: Stamp duty must be paid based on the property’s market value and the applicable rate.
4. Registration with the Sub-Registrar: The gift deed must be registered with the sub-registrar office of the area where the property is located. Both the donor and donee must be present along with two witnesses. The registration process involves verification of documents, payment of registration fees, and obtaining the registered gift deed.
5. Mutation of Property: After registration, the donee must apply for the mutation of the property in the local municipal records to reflect the change in ownership.

8. Important Points to Consider While Gifting Property

• Irrevocability of Gift: Once a gift deed is executed and registered. It cannot be revoked unless it was executed under coercion, fraud, or undue influence.
• Tax Implications: Income tax authorities may tax gifts exceeding INR 50,000 in value to the donee unless a relative gives the gift or it falls under specific exemptions.
• Encumbrance Check: Ensure that the property is free from any encumbrances. Such as mortgages or legal disputes, before executing a gift deed.
• Legal Advice: Consulting a legal expert is advisable to understand the legal, financial, and tax implications of gifting property.

9. Tax Implications on Gift of Property

Under the Income Tax Act, 1961, the donee must pay tax on gifts of property. If the value exceeds INR 50,000, except when gifted by a close relative. As defined under the Act, or in other specified situations such as on the occasion of marriage, inheritance. OR donation to charitable institutions. If you receive the property from a non-relative and its value exceeds INR 50,000, you must pay tax on the entire value of the property as “Income from Other Sources.”

10. Conclusion

Gifting property can be a thoughtful gesture. But it involves several legal and financial considerations, including the payment of stamp duty. Understanding the rules and regulations related to stamp duty on the gift of property is crucial for both the donor and the donee. The rates and exemptions vary from state to state. It is essential to be aware of the applicable laws to ensure a smooth transfer process. Consulting a legal expert or a property lawyer can help navigate the complexities. Ensure that the gift of property is executed legally and efficiently.