Gift Deed Or Will: What Is the Best Way To Pass On Your Assets To Your Beloved?

The recipient or beneficiary of a gift or a will can be anyone or any entity, whether they are members of the same family, friends, or otherwise connected; however, the document must be witnessed by two people

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Real estate is one of India's most sought-after investment opportunities. Immovable property has always been the favourite and probably most controversial topic when it comes bequeathing by a gift deed or a will. There are numerous circumstances in which one may choose to transfer ownership of a property to his loved ones.

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There may come a time when one would prefer to transfer his ownership interest in the property or liquid investments such as shares or mutual funds to his daughter or sister. In such cases, transferring through the use of a gift deed may be the most advantageous option. In another scenario, after one's death, one may need to ensure that his assets is transferred to his dependents according to his wishes and in certain ratio, in which case executing a will may be an appropriate option.

A will is written while the testator is alive and takes effect after his or her death. A gift under Section 122 of the Transfer of Property Act is a transfer of asset/property made without consideration by a donor (asset owner) of his own free will.

The recipient or beneficiary of a gift or a will can be anyone or any entity, whether they are members of the same family, friends, or otherwise connected; however, the document must be witnessed by two people.

The gifting process can be separated into three stages, as follows:

Creating the gift deed: A gift deed is a legal document that explains what is being transferred and to whom. A gift deed is an agreement between a donor and a donee that outlines the simultaneous and reciprocal act of giving and receiving. To be valid, a gift must be given voluntarily rather than under duress and without the exchange of money.

Acceptance: It is a legal necessity that the gift be accepted after it has been executed, and the recipient must accept the gift during the donor's lifetime. If the donee does not accept the gift, it becomes void. Acts like taking possession of the property might validate the acceptance.

Registration: A gift of immovable property cannot transmit any title to the donee unless it is registered, according to Section 123 of the Transfer of Property Act. During registration, two witnesses must attest, and title transfer is feasible after registration.

A will is written by a testator who wishes to pass his property to the people he chooses but only after his death. An executor is appointed by the will and mentioned in the will for the purpose of executing the will with the objective for which it was made. Will execution does not begin until the testator has died.

As stated in section 74 of The Indian Succession Act, 1925, a will should be written by a person who is of sound mind. It can be written by the testator or his agent, but it must be attested by at least two people who are third parties to the will.

Advantages and disadvantages of a gift deed versus a will

Advantages

1. It is carried out during the donor's lifetime and the transfer occurs immediately, whereas "will" is only relevant after death.

2. A gift deed must be registered before it becomes effective. Registration makes it less likely to be sued. On the other side, "will" is prone to litigation.

3. Gift deed transfers are tax-free for both the giver and the donee.

Disadvantages

1. After the gift deed is executed, it is irreversible, however, the "will" can be modified as many times as you desire.

2. In the case of gift deeds, there is an additional payment in the form of stamp duty. The amount of stamp duty varies by state.

Immovable property, such as land, a house, or an apartment, can now be passed down without paying stamp duty to one's children or blood relations. According to Article 34 of the Maharashtra Stamp Act, which was amended in 2017, if the property in consideration is a residential or agricultural property and is gifted (without any payment) to family members, then the stamp duty on the gift deed in blood relation in Maharashtra 2021 or the gift deed stamp duty Mumbai/gift deed stamp duty Pune/gift deed stamp duty Thane is INR 200. Immovable property such as land, a house, or an apartment can now be given to the owner's children or even blood relatives by signing a transfer document on INR 500 stamp paper and paying no stamp duty on the gift deed.

As a result, there is no stamp duty on gift deeds for blood relatives in Maharashtra. Gift of movable property such as shares, ETFs, mutual funds, jewellery, drawings, etc., without consideration and exceeding fair market value of more than INR 50,000 is taxable in the hands of the recipient under Section 56(2) of the Income Tax Act. Sale of shares, ETFs, mutual funds, etc., received as a gift would be taxable under the head Income from capital gains.