Gifting of Property

Definition

Transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donor, and accepted by or on behalf of the donee.

Acceptance when to be made - Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

Transfer how effected

For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

For the purpose of making a gift of movable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery.

Such delivery may be made in the same way as goods sold may be delivered.

Gift of existing and future property

A gift comprising both existing and future property is void as to the latter.

Gift to several of whom one does not accept

A gift of a thing to two or more donees, of whom one does not accept it, is void as to the interest which he would have taken had he accepted.

When gift may be suspended or revoked

The donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be.

A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded.

Save as aforesaid, a gift cannot be revoked.

Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice.

Onerous Gifts

Where a gift in the form of a single transfer to the same person of several things of which one is, and the others are not burdened by an obligation, the donee can take nothing by the gift unless he accepts it fully.

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.

Onerous gift to disqualified person: A donee not competent to contract and accepting property burdened by any obligation is not bound by his acceptance. But if, after becoming competent to contract and being aware of the obligation, he retains the property given, he becomes so bound.

Universal Donee

Subject to the provisions of section 127, where a gift consists of the donor's whole property, the donee is personally liable for all the debts due by and liabilities of the donor at the time of the gift to the extent of the property comprised therein.

Saving of donations mortis causa and Mohammedan Law

Nothing in this Chapter relates to gifts of moveable property made in contemplation of death, or shall be deemed to affect any rule of Mohammedan law.

Gift Tax

Comes under income from other sources under Sec.56(2) of the Income Tax Act:

For after October, 2009:

If an individual or a HUF receives
Any sum of money without consideration exceeding Rs.50,000
Any immovable property, the stamp duty value of which exceeds Rs.50,000
Property other than immovable property, the fair market value of which exceeds Rs.50,000.

Exemptions:

From any relative;

On the occasion of marriage of the individual;

Under a will or by way of inheritance;

In contemplation of death of the payer or the donor;

From any local authority;

Any fund or foundation or university or other educational institution or hospital or medical institution or any trust or institution referred in clause (23C) of section 10;

From any trust or institution registered under section 12AA.
Note definition of relative in case of an individual:

A.      Spouse of individual;

B.      Brother or sister of individual;

C.      Brother or sister of spouse of individual;

D.      Brother or sister of either of the parents of individual;

E.       Any lineal ascendant or descendent of individual;

F.       Any lineal ascendant or descendent of the spouse of individual;

G.     Spouse of the persons referred to in (B) to (F) and

H.      In case of a HUF, any member thereof.