Gift

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Introduction
Gift is a fundamental, frequent mode of voluntary transfer in Indian property law. Unlike contracts for consideration, a gift is gratuitous: the donor transfers present ownership to the donee without consideration. Gifts are used across family transactions, estate planning, matrimonial arrangements and commercial restructuring. For practitioners, gifts raise recurring issues: competency, acceptance, registration, stamp duty, taxation, revocability and vulnerability to attack on grounds of fraud, coercion or undue influence. Mastery of the doctrine and its procedural overlays is indispensable for litigators, conveyancers and in-house counsel.

Core Legal Framework
– Transfer of Property Act, 1882
– Section 122 — Definition of “gift”: a gift is a transfer of certain existing movable or immovable property made voluntarily and without consideration by one living person to another living person and accepted by or on behalf of the donee.
– Sections dealing with capacity, acceptance and completion of gift: the Act sets out rules on who may make or receive a gift, requirement of acceptance and completion formalities (see the Chapters on gifts; practitioners should consult the Act for specific section numbers applicable to capacity and acceptance).
– Registration Act, 1908
– Section 17 — Instruments of gift of immovable property fall within the category of documents compulsorily registrable. Practically: an instrument effecting transfer of immovable property by way of gift must be registered to be effective as to third parties and to satisfy statutory requirements.
– Stamp and Registration Compliance
– Applicable state Stamp Acts — the instrument must be appropriately stamped (market value assessment, duty at state rates). Under-stamping can invalidate or expose the instrument to penalties and adjudication.
– Income-tax Act, 1961
– Section 56(2)(x) (and subsequent amendments) — treatment of gifts for income-tax purposes: receipts by individuals/HUFs above prescribed thresholds can be taxable unless received from specified relatives or on specified occasions/exempt heads. Gifts between relatives are generally exempt; gifts from non-relatives exceeding prescribed monetary limits may be chargeable. (Check current thresholds and circulars; tax law is periodically amended.)
– Other relevant law
– Indian Succession concepts: gifts are inter vivos transfers (take effect immediately) and therefore differ from wills (which take effect only on death).
– Contract law overlays: a gift may be voidable if procured by fraud, misrepresentation, coercion or undue influence (Indian Contract Act, 1872 principles applied by courts).
– Criminal liability: if a gift is procured by criminal means, parallel criminal proceedings may lie (fraud, criminal intimidation, forgery).

Practical Application and Nuances
1. Movable v. Immovable property
– Movable property: gift of movables requires delivery of possession with intent to pass ownership. Constructive delivery (e.g., handing over keys, symbol) may suffice. If delivery is incomplete, courts scrutinize donors’ intention and acts of transfer.
– Immovable property: statutory formalities are exacting. A gift of immovable property must be by registered instrument (Registration Act) and, depending on the facts, accepted by donee during donor’s lifetime. Mere execution and registration without evidence of acceptance by donee can be attacked.

  1. Acceptance — the indispensable element
  2. Acceptance by the donee (or someone authorized to accept on his behalf) is essential for a valid gift. Acceptance may be:
    • Express — a written or oral statement.
    • Implied — by taking possession, paying municipal dues, doing acts of ownership.

  3. Practical point: always obtain and record written acceptance in the gift instrument or by an ancillary signed receipt to avoid disputes.

  4. Who can make or receive a gift

  5. Donor must be competent (normally an adult of sound mind). Donor under legal disability (minor, insane) cannot validly make a gift.
  6. Donee may be natural persons, legal entities, trusts, etc., subject to capacity to hold property.

  7. For jointly owned property: a co-owner cannot purport to gift the entire property if he only owns a share; gift will be effective only to the extent of donor’s share.

  8. Tax and stamp duty realities

  9. Stamp duty: undervaluation to evade stamp duty is a common pitfall. State authorities can reassess value; a high-risk area is family gifts of high-value immovable property executed on undervalued consideration or mis-declaration.

  10. Income-tax: corroborate whether gift falls within exemption from Section 56(2) (relative, specified occasion, specified immovable property below threshold etc.). Maintain documentary trail proving relationship and non-consideration.

  11. Revocation and rescission

  12. Generally, an inter vivos gift when completed cannot be revoked unilaterally by the donor. Exceptions: conditional gifts (if the gift is subject to a condition allowing revocation, or the gift was never accepted, or the donor can show fraud/undue influence/duress).

  13. Gifts to coerce or to avoid creditors: courts may set aside transfers if they are fraudulent preferences, intended to defeat creditors’ claims (fraudulent conveyance doctrine under civil law).

  14. Evidence needed in litigation

  15. Contemporary instrument: registered gift deed, stamped appropriately.
  16. Acceptance proof: signed acceptance, contemporaneous acts of ownership by donee, entries in revenue/municipal records, possession documents.
  17. Capacity proof: age and mental capacity records if challenged.
  18. Chain of possession: documentary records showing delivery/possession after gift (telephone, electricity bills, tax receipts, mutation entries).
  19. For alleged undue influence/fraud: medical records, contemporaneous communications, witness testimony, sanctioning document irregularities (forgery expert opinion), and motive evidence.

Concrete examples
– Family gift: Father gifts half of residential plot to daughter by registered deed. Practical management: ensure daughter’s written acceptance annexed; obtain mutation in municipal records; update property tax records; pay stamp duty on market value to avoid challenge.
– Gift vs. Will issue: Property transferred via registered gift deed in donor’s lifetime vests immediately in donee — cannot be contested simply on claim donor intended it as testamentary unless evidence shows lack of present intention.
– Undervaluation trap: A property worth INR 2 crore documented as gifted for INR 20 lakh to reduce stamp duty — state stamp authority may reassess to market value, impose penalty. Counsel should advise full disclosure and compliance.

Landmark Judgments
(Practitioner note: courts have repeatedly underscored acceptance, registration and equitable principles. Examine these decisions directly for full ratio. Representative rulings to consult:)
– Supreme Court — principles on acceptance and completion of gift: the Court has held that acceptance is an essential element and that mere execution of an instrument does not substitute for donee’s acceptance unless acceptance is proved by conduct or writing. (See reported Supreme Court authorities on gifts regarding acceptance and delivery — consult the official law reports for the full text and propositions.)
– High Courts — valuation, stamp duty and bona fides: High Courts have repeatedly affirmed state authorities’ power to reassess undervalued instruments; bona fides of donor/donee and contemporaneous acts of possession weigh heavily in the court’s assessment.

(Important: Always cite and read the full text of the judgments most relevant to your fact pattern — search for cases dealing with: (i) acceptance (ii) registration requirements (iii) gifts and stamp-duty reassessment (iv) gifts under undue influence).)

Strategic Considerations for Practitioners
1. Drafting the gift deed (best practice)
– Clear identification of parties and their capacity.
– Precise description of property (survey nos., boundaries), statement of present transfer, recital of donor’s intention to transfer without consideration, and an express clause of acceptance by donee with signature and date.
– Clause recording delivery/possession and contemporaneous acts evidencing acceptance (e.g., “donee has taken physical possession and will be responsible for all outgoings from [date]”).
– Consider protective clauses: representations as to freedom from encumbrances; indemnity for claims; consent of co-owners where applicable.
– Note consideration for revocability only if you want conditionality — unconditional gifts once completed are not revocable.

  1. Procedural checklist (conveyancing)
  2. Verify title and co-ownership rights before drafting gift deed.
  3. Ensure instrument is correctly stamped per state Stamp Act and compulsorily registered.
  4. Obtain donee’s explicit written acceptance at registration counter or as annexure.
  5. Update revenue and municipal records and seek mutation promptly.

  6. Preserve all receipts for stamp duty, registration, mutation and tax filings.

  7. Pre-empt defensive strategies when attacking a gift

  8. If challenging on undue influence/fraud: start with contemporaneous evidence, medical records (if donor’s mental capacity is in issue), communications and witnesses to show coercion or lack of free consent.
  9. If challenging on lack of acceptance: focus on absence of possession, absence of acts attributable to donee, and timing of the deed.

  10. If state reassesses for stamp duty evasion: collect valuation reports, expert opinion, contemporaneous negotiations, and proof of market value at time of execution.

  11. Offensive strategies when defending a gift

  12. Show robust documentary trail: registered deed, stamped documents, acceptance, mutation, tax and utility records in donee’s name.
  13. Establish donor’s continuing freedom of mind and absence of motive for fraud: witness affidavits, family testimony, no pending creditor suits at date of transfer.
  14. For tax audits, produce relationship proof (to claim exemptions under income-tax law), bank trail for maintenance or transactional context.

Common pitfalls to avoid
– Registering a deed but failing to obtain or record acceptance by the donee.
– Undervaluing the property to save stamp duty — exposure to reassessment, penalties and criminal proceedings.
– Assuming joint-ownership consent is unnecessary; co-owner’s rights must be respected.
– Treating gift as tax-free without verifying the exception in income-tax law (relationship and thresholds).
– Neglecting to update municipal/revenue records and failing to document possession—easy stepping stones for attack.

Conclusion
A gift in Indian law is simple in concept but complex in practice. Its validity rests on three pillars: donor’s capacity and intention, donee’s acceptance, and statutory formalities (registration and stamping for immovables). For practitioners, the practical battle is won by meticulous documentation: explicit acceptance, proper stamping and registration, mutation and a contemporaneous evidentiary trail demonstrating possession and title acts. Always evaluate tax consequences, state stamp laws and the potential for attack on grounds of undue influence or fraud. When advising clients, prioritize compliance and transparency — that is the surest protection against subsequent litigation.