Gifting property in Maharashtra: how a gift deed works
Families transfer property to each other constantly, usually informally and often badly. A gift deed is the proper instrument for doing it during your lifetime, and Maharashtra provides concessional stamp duty for transfers to close relatives. The decision worth thinking about is not how to gift but whether to gift at all rather than leaving it by will.
What a gift deed does
A gift transfers ownership without consideration, meaning nothing is paid in return. That is what distinguishes it from a sale, and it is why the stamp duty treatment differs.
For immovable property the gift must be by a registered instrument and must be accepted by the recipient during the donor's lifetime. Acceptance matters: a gift the recipient never accepted is incomplete.
Once made and registered, a gift is generally irrevocable. The donor cannot change their mind, which is the single most important thing to understand before executing one.
That irrevocability is the whole difference from a will, which can be changed at any time and takes effect only on death.
- Transfers ownership without consideration
- Must be registered and accepted in the donor's lifetime
- Generally irrevocable once made
- A will, by contrast, can be changed at any time
The concessional duty for close relatives
Maharashtra provides concessional stamp duty for gifts of residential property to close family members, rather than charging the full rate that would apply on a sale.
Who counts as a close relative for this purpose is defined, and the concession does not extend to every family relationship, so confirm that your intended recipient qualifies before assuming.
The rate and the qualifying relationships are set by the state and have been revised over time, so verify the current position with the registration office or a lawyer rather than relying on a figure you have been told.
Registration fees apply separately from stamp duty, and both should be budgeted. Our guide to stamp duty and registration charges covers the general framework.
Gift deed against will: the real comparison
A gift transfers now and cannot be undone. A will transfers on death and can be revised as circumstances change. That is the fundamental trade and everything else follows from it.
The case for gifting is certainty and simplicity. The transfer is complete, the recipient's title is clear, and there is no probate, no succession dispute and no ambiguity about intent.
The case against is loss of control. A donor who gifts their home and later needs it, or falls out with the recipient, or needs to raise money against it, has no recourse. This happens more often than people expect.
Our note on wills and succession planning covers the alternative, and for most people living in the property concerned, a will is the safer instrument.
- Gift: certain, complete, no probate, irreversible
- Will: revisable, takes effect on death, may need probate
- The donor's continued need for the property is the deciding factor
The protections a donor should consider
Where the donor intends to continue living in the property, that should be provided for explicitly rather than assumed on the basis of the relationship.
Reserving a right of residence for the donor's lifetime is a recognised arrangement and should be drafted properly into the deed rather than agreed verbally.
Consider gifting a share rather than the whole, which retains an interest and some influence while still achieving part of the objective.
And consider whether the objective is actually achieved by a will instead. Many gifts are made to avoid a probate process that would have been considerably less costly than the consequences of the gift going wrong.
Where gifts go wrong
Elder abuse is the serious end of this. Older owners are sometimes pressured into gifting property to one child, and legislation exists providing for maintenance of parents and senior citizens which can be relevant where a transfer was made on the understanding that the recipient would care for the donor and they then did not.
If you are advising an older relative, ensure they take independent advice from someone who is not connected to the recipient. This single step prevents most of the difficulty.
Family imbalance is the milder version. A gift to one child during the donor's lifetime affects what remains for others and is a common source of dispute after death, particularly where it was not discussed.
Undisclosed encumbrances are the third. A gifted property with an outstanding loan or charge carries it, and a recipient should verify the title as carefully as a purchaser would. Our note on title verification applies equally here.
- Ensure older donors take genuinely independent advice
- Discuss the effect on other family members before, not after
- A gifted property carries its existing charges
- Verify title as carefully as a purchaser would
After the gift is made
The recipient must complete the society transfer and obtain the share certificate in their name, exactly as on a purchase. Our note on society transfer and NOC covers the process.
Mutation of municipal records follows, so property tax is assessed in the new owner's name. Our guide to property tax covers why skipping it causes problems later.
In Navi Mumbai, where the land is CIDCO leasehold, the transfer may require CIDCO's involvement and attract its charges. Confirm this before executing rather than after.
The recipient should also review their own will, since they now own something they did not before, and update nominations accordingly.
The tax dimension
Gifts of property between specified close relatives are generally treated favourably under income tax rules, whereas gifts to others can be taxable in the recipient's hands above a threshold.
The recipient inherits the donor's cost of acquisition and holding period for capital gains purposes when they eventually sell, which our guide to capital gains on a property sale covers.
That last point matters and is frequently missed. A recipient selling shortly after receiving a gift may face a substantial gain calculated from the original acquisition, not from the date of the gift.
As with everything in this area, confirm the current position with an adviser, since both the income tax treatment and the stamp duty concession have been amended over time.
