Kriti Mehta, a 31-year-old fashion designer from Delhi, is starting her online boutique store to sell exclusive Indian ethnic wear for women. Kriti has arranged 40% of the funds needed to launch and promote the e-commerce platform, but she will require a loan for the remaining 60%. Kriti will not have any problem getting the funds, as her mother is transferring a piece of property in her name, which she can use as office space and also take out a mortgage against it to finance her business.
However, both Kriti and her mother are not sure about how to proceed with the property transfer process. Are court proceedings involved in the transaction? What will be the tax implications? Should Kriti’s mother make a Will or simply gift the property to her daughter? Kriti wishes to transfer the property in her mother’s name once her business gets rolling. Is it possible? These are some questions that Kriti and her mother are looking for answers. They are not the only ones. There are many others seeking answers to such questions as property transfer can create difficult legal hassles in the future. Let’s take a deep dive and learn more about the legal aspects of property transfer through a Will and a Gift Deed.
Property Transfer through Gift Deed
You will have to transfer the ownership of a property as a gift if you want the recipient to start enjoying the benefits of the asset with immediate effect. You can gift any self-owned property to any person you wish to, provided that the property is free of disputes, and as per the Indian Contract Act, you are eligible to enter into a contract. The recipient of the real estate can be anyone, who has a sound mind and is 18 years and above. You can gift a property through a gift deed.
Key Points to Remember
- You can make a property gift during your lifetime.
- Once accepted, the recipient will become the owner of the property.
- Registration of a gift deed is mandatory.
- For the transfer of ownership, the government will charge registration fees and stamp duty on the property’s market value.
- No taxes on gifts made to immediate relatives.
- For gifts over INR 50,000, made to people who are not immediate relatives or non-relatives, the recipient needs to pay taxes on the gifted real estate.
- Property gifts are irrevocable.
Property Transfer by a Will
Unlike a gift deed, which enables a recipient to become the owner of a property during the lifetime of the transferor, a Will, on the contrary, allows the ownership to change hands only after the death of the person executing the Will to transfer a property. According to the prevailing laws, you do not have to register a Will or pay any stamp duty for it.
Key Points to Remember
- Registration is not compulsory, but registering the Will can boost transparency and help avoid future litigation.
- A person receiving property through a Will does not have to pay taxes.
- After the demise of the recipient, the ownership of the real estate passes on to the successor/s as per the succession laws of the land.
- Anyone executing a Will can change Will’s content or revoke it any number of times during their lifetime.
Gift Deed or a Will: Which One Is Better?
Now that you know the core characteristics of a gift deed and a Will, let us analyse both the options and assess which one works best for you while transferring a property.
A gift deed is an ideal option if you want the recipient/s to immediately benefit from the transfer of the property. However, for people who want the asset to go to the desired recipient/s only after their death, transferring the property by a Will is a better option for them.
The answer to the question lies in your objective, priorities, and circumstances behind the transfer of the property. Regardless of what your preferred mode of property transfer is, please follow the rules and exercise extreme caution while executing a Will or a gift deed.