Gifts – A Strategic and Thoughtful Act in Estate Planning
- Rashmi Shah
- May 12
- 5 min read
Estate Planning & Succession Series
Series 1 | Article 5
While traditionally associated with celebrations, milestones, or tokens of affection, Gifting can also serve as a meaningful and strategic tool in estate planning. A Gift of either movable or immovable property is primarily governed by the Transfer of Property Act, 1882 (‘TOPA’). For tax implications, one must look to the Income Tax Act, 1961 (‘IT Act’). Additionally, the nuances of gifts and specific provisions may also be found under some personal laws. This article outlines the key legal and practical aspects of Gifting as part of estate planning under Indian laws.
What is a Gift?
A Gift, in legal terms, is a voluntary and gratuitous transfer of movable or immovable property made without consideration, by one person, called the Donor, to another, called the Donee, and accepted by the Donee during the lifetime of the Donor. Unlike Wills, which takes effect post the lifetime of the testator, a Gift is an immediate transfer made during one’s lifetime.
Essential of a valid Gift Deed
To be legally valid and effective, a Gift must meet the following criteria:
Voluntary: The Gift must be made voluntarily, without fraud, coercion, or undue influence.
Acceptance: The Donee must accept the Gift during the lifetime of the Donor.
Without Consideration: The Gift must be given without expecting anything in return.
Written Instrument: If the Gift comprises immovable property, it must be made through a written and registered instrument.
Registration: Under Section 17 of the Registration Act, 1908, registration of a Gift deed is mandatory for immovable property.
Exceptions to Chapter VII of the TOPA
While Chapter VII of the TOPA (Sections 122–129) governs essential features and validity of Gifts, Section 129 specifically outlines two exceptions where the provisions of this chapter do not apply:
Gifts made in Contemplation of Death (Donatio Mortis Causa):These are Gifts of movable property made by a person who anticipates imminent death. Such Gifts become effective only upon the death of the Donor. If the Donor survives or revokes the Gift before death, the Gift becomes void. These Gifts are exempt from the formal requirements of Chapter VII of the TOPA.
Gifts under Muslim Personal Law:Gifts made by Muslims are governed by their personal laws, which allow for oral Gifts of both movable and immovable property, provided the essential elements declaration, acceptance, and delivery of possession are fulfilled. These Gifts are thus not bound by the formalities laid out in Chapter VII.
Stamp Duty on Gift Deeds & Registration
Stamp duty is payable on instruments of Gift for both movable and immovable properties. The applicable stamp duty is determined based on the market value of the property and the relationship between Donor and Donee. Close relatives often enjoy concessions or exemptions, but the rules vary from state to state.
For Example – The stamp duty in Maharashtra for an instrument of Gift (as per Maharashtra Stamp Act, 1958 – Schedule I, Article 34) is:
To parents, grandparents, and siblings: 3%
To son, daughter, grandson, granddaughter, or spouse: ₹200
Registration (if property value exceeds ₹30 lakh) (Only for immovable property:
₹30,000 flat for property > ₹30 lakh
1% of property value if < ₹30 lakh
Further an additional 1% metro cess applies only to immovable properties.
Taxation of Gifts
Under Section 56(2) of the IT Act, Gifts received by an individual or Hindu Undivided Family (HUF) exceeding ₹50,000 in aggregate in a financial year are taxable under the head "Income from Other Sources", unless:
The Gift is received from relatives as specified in the IT Act. A “relative” as defined under the IT Act includes:
Spouse of the individual
Brother or sister of the individual
Brother or sister of the spouse
Brother or sister of either parent of the individual
Any lineal ascendant or descendant of the individual
Any lineal ascendant or descendant of the spouse of the individual
spouse of the person referred to in items (b) to (f)
Note: Friends and cousins do not qualify as relatives under this definition. However, sons-in-law and daughters-in-law are covered as spouses of lineal descendants
The Gift is received on the occasion of marriage
The Gift is received under a Will or by inheritance
The Gift is received in contemplation of death of the Donor
Conditional Gift or life interest created in a Gift
A Gift can be made subject to conditions, provided these conditions are lawful, specific, and do not violate public policy or fundamental rights. One valid condition is the creation of a life interest, where the Donor (or a person related to the Donor, such as the spouse) retains the right to use or enjoy the property during their lifetime. The Donee receives full enjoyment of the property only after the life interest ends. This arrangement is useful in estate planning for aging individuals and / or for the dependents.
Revocation of a Gift Deed
As per Section 126 of the TOPA, a Gift cannot be revoked or suspended unless a specific revocation clause is included in the Gift deed. A Gift that is revocable solely at the Donor’s discretion is considered void. However, revocation is permissible if the Donor and Donee have mutually agreed to certain conditions at the time of the Gift, or if the Gift is revocable in a manner similar to the rescission of a contract.
Additionally, Section 23 of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007, provides that a senior citizen who transfers property subject to the condition of being maintained by the transferee can seek revocation if that condition is not fulfilled. In such cases, the Maintenance Tribunal is empowered to declare the Gift void.
Therefore, if a senior citizen gifts a property to a child or heir with the expectation of being cared for, and such care is not provided, the Gift may be revoked. It may be prudent to include explicit conditions in the instrument of Gift to ensure enforceability and protection of the Donor’s interests.
When is Gifting Appropriate?
Gifting is particularly suited for:
Intergenerational transfers to children or grandchildren
Pre-marriage arrangements, such as settling property on a son or daughter
Consolidating family business ownership
Conclusion
A Gift is more than a gesture, it is a legally significant and emotionally impactful act. When executed thoughtfully and with proper documentation, Gifting can:
Minimise potential estate disputes
Create financial independence for loved ones
Fulfil personal and familial intentions during one’s lifetime
Need assistance with a Gift or estate planning? Our team can help you structure your affairs clearly, legally, and in line with your family’s needs.
Coming Up Next
In the next article of this series, we will explore Partition and Family Settlements used in estate planning, especially within joint families and shared ownership structures.
About the Author
Rashmi Shah has been with MZD Legal Consultancy since 2019 and has been practicing law since 2014. Rashmi is a part of the Estate Planning, Succession, and Real Estate practices at the firm. Rashmi also has an expertise in trade mark law and disputes. She can be contacted at rashmi@mzdlegal.in and +91-9920826007.
About MZD Legal Consultancy
MZD Legal Consultancy is a boutique law firm in Mumbai, India. The firm was established in 2011 and comprises professionally qualified lawyers with varied levels of experience and expertise in specific practice areas. To know more, click here www.mzdlegal.in