Want to pass a property and not sell it? You can gift it or relinquish it, especially if you want to pass it to relatives. When it comes to transferring property, a sales deed may not always be the first choice. In such cases, instruments like a gift deed or relinquishment deed are of help. However, blindly choosing either can lead to problems. The transferor needs to first understand the purpose of each document before getting it drafted. These documents are designed to play a specific role in the transfer of property and, hence, it is important to consult a lawyer. Read further to know the benefits as well as drawbacks of each.
This document allows you to gift your assets or transfer ownership without any exchange of money. To gift immovable property, you just have to draft the document on a stamp paper, have it attested by two witnesses and register it. Registering a gift deed with the sub-registrar of assurances is mandatory as per Section 17 of the Registration Act, 1908, failing which the transfer will be invalid. Besides, such a transfer is irrevocable. Once the property is gifted, it belongs to the beneficiary and you cannot reverse the transfer or even ask for monetary compensation.
The biggest benefit is that there is no tax implication if you are gifting property to certain relatives. However, you still have to pay stamp duty, which can vary from 1-8%, depending on the state in which the transfer takes place. If you are gifting property to a non-relative, the stamp duty would be higher at 5-11%.
Though a gift deed cannot be revoked, it can be challenged in court, coercion and fraud being the most common grounds. So, if you have been tricked into gifting property, you can take the matter to court and have the transfer reversed. It can also be challenged on the grounds that the donor was not of sound mind or a minor. People don’t generally have a challenge-free gift deed therefore consulting a lawyer while drafting it can lower the chances of it being challenged. Also, you cannot gift a property that’s held jointly.
This document is quite different from a gift deed, though the legal implications are the same. You can use this instrument if you want to transfer your rights in a particular property to another co-owner. Such a transfer is also irrevocable even if it is without any exchange of money. As with all documents related to the transfer of immovable property, a relinquishment deed needs to be signed by both parties and registered. The stamp duty is similar to that for a gift deed. However, there is no discount for relatives, nor are there any tax benefits. Also, both stamp duty and tax will be applicable only on the portion of the property that you relinquish, not on its total value.
It allows seamless transfer of your share in a jointly-held property. This document is most commonly used when a person dies without leaving behind a will and all siblings end-up inheriting the property. Unlike a gift deed, you can draw the relinquishment deed for monetary consideration.
There are no tax benefits, for as per the tax laws, the term ‘transfer’ includes relinquishment, not gift. Hence, when you are relinquishing property for monetary consideration, it will result in capital gains for the transferor. If the consideration is less than the stamp duty value of the property, the difference between the stamp duty and the consideration will be taxed in the hands of the buyer. If you relinquish it without any consideration, the stamp duty value of the property will be its sales price.
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