Gifting in India: Legal Provisions, Formalities, and Tax Implications

Introduction

A gift, as governed by the Transfer of Property Act, 1882, is a voluntary transfer of ownership from one person to another without any consideration, reflecting the principles of altruism and affection. This transfer involves the donor (the person giving the gift) and the donee (the person receiving it) and is characterized by an unequivocal intention to transfer ownership, acceptance by the donee, and delivery of possession. The legal framework mandates that a gift must be executed through a written instrument, often referred to as a gift deed, which is duly signed by the donor and attested by witnesses. While gifts are typically irrevocable, exceptions may arise if they are made under coercion, fraud, or undue influence, rendering them void. Judicial interpretations have further clarified that gifts must be unconditional unless specified otherwise, and that incomplete delivery or non-acceptance by the donee renders the gift legally ineffective. Additionally, the law ensures that gifts made in good faith, particularly for love and affection, are protected while also providing safeguards against misuse or malafide transfers, thereby maintaining a balance between the donor’s intent and the donee’s rights.

Definition and Essentials of a Gift: Legal Framework in India

The concept of a gift is governed under Sections 122 to 129 of the Transfer of Property Act, 1882 (TPA), which outlines its definition, essential elements, formalities, and conditions for validity. Additionally, other statutory provisions, including the Indian Contract Act, 1872, the Registration Act, 1908, and personal laws for different communities, may apply to certain aspects of gifting. Below is a detailed explanation of the essentials of a valid gift with relevant sections and related provisions.

Definition of Gift (Section 122, TPA)

A gift is defined as the voluntary and uncompensated transfer of certain existing movable or immovable property by one person (donor) to another (donee), accepted by or on behalf of the donee during the donor’s lifetime and while the donor is competent to transfer the property.

Key Essentials of a Valid Gift

Transfer of Ownership (Section 122, TPA):
The donor must transfer full ownership of the property to the donee. Partial ownership or retention of control by the donor is not permitted, except in cases explicitly provided under conditional gifts (Section 126, TPA). For instance, a gift that stipulates revocation upon a future event must adhere to the conditions outlined in Section 126.
Existence of Property:
The property being gifted must exist at the time of transfer and must be tangible and identifiable. Section 6 of the TPA, which deals with the transferability of property, states that future property cannot be transferred, and thus cannot form the subject of a gift.
Voluntary Act and Free Consent (Section 122, TPA and Section 14, Indian Contract Act, 1872):
The act of gifting must be voluntary and free from coercion, fraud, undue influence, or misrepresentation. Any violation of free consent may render the gift voidable under Section 19 of the Indian Contract Act.
Without Consideration (Section 122, TPA):
The absence of consideration is a defining characteristic of a gift. Any transfer involving monetary or material benefit to the donor is treated as a sale, exchange, or barter and does not qualify as a gift under this provision.
Acceptance by Donee (Section 122, TPA):
The donee must accept the gift during the donor’s lifetime and while the donor is capable of making the transfer. Non-acceptance renders the gift void. Acceptance can be implied, such as through acts like taking possession, or explicit through formal acknowledgment.
Delivery of Possession (Section 123, TPA):
For movable property, physical delivery or symbolic delivery is required. In the case of immovable property, a registered gift deed is mandatory under Section 123, and it must be executed in accordance with Section 17 of the Registration Act, 1908, which mandates registration for immovable property valued over ₹100.

Additional Provisions

Revocation of Gift (Section 126, TPA):
Gifts are generally irrevocable, but Section 126 allows revocation under specific conditions, such as mutual agreement at the time of gifting or occurrence of a specified event. Courts have clarified that such conditions must not be against public policy or the principles of natural justice.
Onerous Gifts (Section 127, TPA):
When a gift involves liabilities or obligations (onerous gifts), the donee has the discretion to accept or reject the gift. If the donee accepts a part of the gift burdened by obligations, they are presumed to accept the burden attached to it.
Universal Donee (Section 128, TPA):
A universal donee, who receives the donor’s entire property, is personally liable for all debts and liabilities of the donor existing at the time of the gift, up to the value of the property received.
Gifts under Personal Laws:
- Under Hindu Law, gifts are governed by general TPA provisions, but customary rules regarding ancestral property and consent of family members may apply.
- Under Muslim Law, a gift (Hiba) does not require a written document but must involve an offer, acceptance, and delivery of possession. Registration is not mandatory for Hiba.
- Under Christian and Parsi Laws, gifts are governed primarily by the TPA and other secular laws.
Tax Implications:
Gifts are also regulated under the Income Tax Act, 1961. Section 56(2)(x) treats gifts exceeding ₹50,000 in value as taxable income unless received from relatives, on special occasions like marriage, or as inheritance.

Formalities for Execution of a Gift: Legal Requirements

The execution of a valid gift under Indian law is governed by Section 123 of the Transfer of Property Act, 1882 (TPA), which outlines distinct formalities for the transfer of movable and immovable property. Compliance with these formalities is crucial to ensure the legal enforceability of a gift. Below is a detailed analysis of the formal requirements, supplemented by related provisions under the Registration Act, 1908, and other relevant laws.

1. Formalities for Immovable Property

For gifting immovable property, the law mandates strict procedural adherence:

Registered Instrument (Section 123, TPA):
The gift must be executed through a registered document, known as a gift deed. The deed must explicitly state the details of the donor, donee, and property, along with the donor’s intention to transfer ownership without consideration.
Signature and Attestation (Section 123, TPA):
The gift deed must be signed by the donor and attested by at least two witnesses. Witnesses must be competent under the Bharatiya Sakshya Adhiniyam, 2023, ensuring the authenticity of the document and providing testimony if required in disputes.
Mandatory Registration (Section 17, Registration Act, 1908):
As per Section 17, the registration of a gift deed for immovable property is compulsory, irrespective of its value. The registration must occur in the office of the Sub-Registrar within whose jurisdiction the property is situated, as required under Section 28 of the Registration Act.
Stamp Duty (Indian Stamp Act, 1899):
The gift deed must be stamped as per the applicable rates in the respective state. Failure to affix the requisite stamp duty can lead to the document’s inadmissibility in court.
Delivery of Possession (Judicial Interpretation):
While Section 123 does not explicitly mandate the delivery of possession for immovable property, courts have held that actual or symbolic delivery strengthens the donee’s title.

2. Formalities for Movable Property

The procedure for transferring movable property as a gift is less formalized but still requires adherence to specific conditions:

Delivery of Possession (Section 123, TPA):
The transfer of movable property is deemed valid through delivery of possession alone. This can be achieved through:
- Physical Delivery: Handing over the property directly to the donee, such as gifting a piece of jewelry or money.
- Symbolic Delivery: Conducting an act that symbolizes the transfer, such as handing over keys to a locker containing the gifted items.
No Requirement for Registration:
Unlike immovable property, the transfer of movable property does not necessitate a written instrument or registration under the TPA. However, if a formal gift deed is executed for movable property, registration is recommended but not mandatory.

Additional Considerations and Provisions

Validity and Enforceability:
For both movable and immovable property, the acceptance of the gift by the donee (during the donor’s lifetime and capacity) is mandatory under Section 122, TPA. Without acceptance, the gift becomes void.
Conditional Gifts (Section 126, TPA):
If the gift is subject to conditions, those conditions must be clearly stated in the gift deed. The law allows revocation of gifts if specific conditions agreed upon by both parties at the time of the gift are not fulfilled.
Income Tax Implications (Section 56(2)(x), Income Tax Act, 1961):
Gifts of movable or immovable property exceeding ₹50,000 in value are taxable in the hands of the donee unless received from specified relatives, on specified occasions, or as inheritance.
Gifts Under Personal Laws:

Under Muslim Law, registration of a gift (Hiba) for movable or immovable property is not mandatory if delivery of possession is completed.
Under Hindu Law, gifts involving immovable property must follow TPA provisions, including registration and attestation.

Revocation of Gifts: Legal Framework

Under Section 126 of the Transfer of Property Act, 1882 (TPA), gifts are generally considered irrevocable to preserve their unconditional and altruistic nature. However, the law provides specific grounds and circumstances under which a gift may be revoked. These provisions are designed to prevent abuse of the gifting process, ensure fairness, and uphold legal agreements between the donor and the donee. Below is an in-depth explanation of the conditions for revocation, supplemented by related provisions and judicial interpretations.

1. Revocation by Mutual Agreement (Section 126, TPA)

A gift can be revoked if both the donor and donee agree upon specific conditions for revocation at the time of transfer.

Pre-Conditioned Revocation:
The mutual agreement must be documented explicitly in the gift deed, outlining the conditions under which the gift may be revoked. For example, a gift may include a condition that the donee should not alienate the property or use it for purposes contrary to the donor’s intent.
Limitations on Conditions:
The conditions for revocation must not be illegal, immoral, or against public policy. Any revocation clause that violates these principles is void under Section 23 of the Indian Contract Act, 1872.
Irrevocability of Absolute Gifts:
Once a gift is unconditional and absolute, it cannot be revoked based on subsequent disagreements unless fraud, coercion, or undue influence can be proven.

2. Revocation Due to Fraud, Coercion, or Undue Influence

A gift that is obtained through fraudulent means, coercion, misrepresentation, or undue influence is voidable at the discretion of the donor, as per Section 126, TPA, and related principles under the Indian Contract Act, 1872.

Fraud or Misrepresentation:
If the donee deceived the donor about material facts or made false representations to induce the gift, the donor has the right to revoke it under Section 17 of the Indian Contract Act, 1872.
Coercion and Undue Influence:
Gifts made under duress or through exploitation of a dominant position are voidable under Sections 15 and 16 of the Indian Contract Act, 1872. For instance, a gift obtained from an elderly or vulnerable donor through undue influence may be revoked if proven.

3. Revocation Due to Failure to Fulfill Conditions

If the donee fails to comply with the terms explicitly agreed upon at the time of transfer, the donor has the right to revoke the gift.

Conditional Gifts (Section 126, TPA):
Gifts made subject to specific conditions—such as the donee taking care of the donor or maintaining the gifted property—can be revoked upon non-compliance.
Judicial Safeguards:
Courts evaluate the validity and enforceability of such conditions to ensure they do not contravene public policy or fundamental rights. Conditions must also be specific and unambiguous to be enforceable.

4. Revocation Must Be Total, Not Partial

Revocation, if valid, must apply to the entire gift, as partial revocation is not permitted under the TPA. For example, if the conditions for revocation are met, the donor cannot reclaim only a part of the gifted property.

Additional Provisions and Related Acts

Registration Act, 1908:
If a gift deed includes a revocation clause, the registration of the deed ensures legal recognition of the conditions and prevents disputes about the donor’s intent.
Indian Contract Act, 1872:
- Section 10: Emphasizes the importance of free consent in agreements, applicable to the gifting process.
- Section 23: Prohibits agreements with unlawful or immoral conditions, which also applies to revocation clauses.
Muslim Law on Revocation:
Under Muslim personal law, gifts (Hiba) can generally be revoked before possession is delivered to the donee. Once possession is complete, revocation is permissible only under certain circumstances, such as fraud or duress.

Onerous Gifts: Legal Framework and Provisions

Onerous gifts, as defined under Section 127 of the Transfer of Property Act, 1882 (TPA), refer to gifts that come with obligations, burdens, or liabilities which the donee must accept along with the gift. These types of gifts differ from ordinary gifts in that they impose a duty on the donee, typically related to maintenance, payment of debts, or other specific responsibilities. The legal treatment of onerous gifts ensures that the donee's consent is given voluntarily and with full awareness of the burdens attached. Below is an elaborate explanation of the provisions governing onerous gifts, complemented by related legal principles and judicial interpretations.

Key Provisions under Section 127 (TPA)

Acceptance of the Benefit Implies Acceptance of the Burden

Under Section 127 of the TPA, the donee of an onerous gift cannot accept the benefit of the gift while simultaneously rejecting the corresponding burden or liability. The legal principle here is that a gift burdened with obligations cannot be separated into "good" and "bad" parts for the donee's benefit. The donee must accept the entire gift along with its liabilities, whether they relate to debts, responsibilities, or other encumbrances attached to the property.

Example: If a donor gives a house but also leaves the donee responsible for its mortgage, the donee cannot accept the house and refuse to take on the mortgage. The donee must accept both the property and the mortgage.

Selective Acceptance of Distinct Items

If an onerous gift consists of multiple distinct items, the donee has the option to accept or reject each item independently, provided the items are not interdependent or cannot be used together to fulfill the donor’s intent. This means that if the items are separate and not intrinsically linked, the donee may choose to accept some but not all parts of the gift.

Example: If a donor gives a gift of land along with a house on the condition that the donee will pay for the land’s upkeep, but the donee has no use for the land and only needs the house, the donee may choose to accept the house while rejecting the land, assuming both are not interdependent.
Interdependence of Items:
If the items in question are interdependent, such as a farm with equipment for farming, the donee cannot accept one part (e.g., the farm) and reject the other (e.g., the equipment), as the gift would not serve its intended purpose without all parts being accepted.

Additional Provisions and Related Acts

Acceptance of Burden Under Civil Law Principles

While Section 127 specifically addresses onerous gifts under the TPA, general contract law under the Indian Contract Act, 1872 also plays a role in these situations. Specifically, the principle of acceptance of a contract with full knowledge of the terms applies. If a donee accepts a gift with clear knowledge of its encumbrances, they are bound by those terms.

Section 2 of the Indian Contract Act, 1872: This section defines a contract as an agreement that is legally enforceable. In the context of onerous gifts, the donee is essentially entering into a contract when they accept the gift, and by doing so, they agree to the terms and obligations attached to it.

Indian Succession Act, 1925

In cases of gifts made in a will or testament, the Indian Succession Act, 1925 provides additional rules for the execution of bequests. If the bequest is onerous, meaning it involves obligations or debts that must be settled by the donee, the donee must accept both the gift and its burden. This principle ensures that the donee is aware of the liabilities before accepting the bequest.

Universal Donee and Legal Implications of Gifts

Universal Donee (Section 128 of the Transfer of Property Act, 1882) refers to a person who, through a gift, inherits all or the entire property of the donor, along with any liabilities or debts attached to it. This provision ensures that the donee accepts not only the benefit of the gift but also the burden of the donor's obligations, which may include both movable and immovable properties, as well as any debts or liabilities associated with them. The concept of the universal donee is intended to safeguard the rights of creditors and to prevent fraudulent transfers that might undermine the financial interests of others.

Key Provisions and Responsibilities of a Universal Donee

Liability for Debts and Liabilities

Under Section 128 of the TPA, a universal donee inherits the donor's property and is liable for all debts existing at the time of the transfer. This means that the donee cannot selectively accept only the tangible assets of the donor, such as land or money, while leaving behind the associated liabilities. Instead, the donee must assume responsibility for any debts or obligations incurred by the donor up to the time of the gift.

Example: If a donor transfers ownership of a property to a universal donee, but the property is mortgaged, the donee would assume responsibility for repaying the mortgage, as it is a liability associated with the property.
Protection of Creditors’ Rights:
The provision ensures that creditors are protected from potential fraudulent transfers. For instance, if a donor attempts to transfer their property to a donee to avoid paying debts, the creditors can challenge the gift if it leaves the donor without sufficient assets to settle outstanding liabilities. This serves as a safeguard for creditors, ensuring that the transfer does not prejudice their claims.

Prevention of Fraudulent Transfers

The concept of a universal donee ensures that any gifts made under fraudulent circumstances such as attempting to defraud creditors or evade legal responsibilities are scrutinized. Creditors can seek recourse by contesting the gift if it is made to a universal donee who is incapable of settling the debts left by the donor.

Fraudulent Conveyance Act, 1952:
The Fraudulent Conveyance Act is an essential provision that enables creditors to challenge property transfers made with the intent to defraud. The principle of fraudulent transfers applies not only to gifts made under the TPA but also to transactions involving sales, leases, and other conveyances. This provision ensures that the universal donee cannot escape responsibility for the donor's debts by invoking the gift’s status.

Tax and Legal Implications of Gifts

Income Tax Act, 1961

Under Section 56(2) of the Income Tax Act, 1961, gifts exceeding ₹50,000 (excluding gifts from specified relatives or on specific occasions) are taxed as "Income from Other Sources." This provision ensures that gifts are not used as a mechanism to avoid tax liabilities or disguise income.

Exemptions:

Gifts from specified relatives, such as parents, siblings, and spouses, are exempt from tax.
Gifts received on occasions such as weddings or inheritances may also be exempt from tax under certain conditions.

Tax on Non-Relatives:

Gifts from non-relatives exceeding ₹50,000 are subject to tax, and the recipient must report the gift as income unless an exemption applies.

Stamp Duty and Registration Fees:

Gifts, particularly those involving immovable property, are subject to stamp duty, which is a tax levied on legal documents used for the transfer of property. The stamp duty rate varies across different states in India and depends on the type and value of the property being gifted.

Registration Act, 1908

Under the Indian Registration Act, 1908, gifts of immovable property must be registered for them to be legally valid and enforceable. Registration ensures transparency and protects both the donor and the donee by providing an official record of the gift. Registration is mandatory for gifts of immovable property, including land, houses, or apartments.

Hindu Law (Gift under Hindu Law)

Under Hindu Law, gifts are primarily governed by the Hindu Succession Act, 1956, and the Indian Contract Act, 1872. A gift made by a Hindu can be either an oral gift or a gift by deed.

Gift by Deed

Under Hindu law, a gift of immovable property can be made through a registered deed, similar to the requirements under the Transfer of Property Act, 1882 (TPA). The gift deed must be executed in writing, and it should be registered under the Indian Registration Act, 1908.

Conditions for Valid Gift under Hindu Law:

For a gift to be valid under Hindu law, the following conditions must be fulfilled:

Intention of the Donor: The donor must have the intention to make a gift voluntarily.
Acceptance by the Donee: The gift must be accepted by the donee during the lifetime of the donor.
Delivery of Possession: There should be delivery of possession, and it should be immediate.
Legal Capacity: Both the donor and the donee must have legal capacity to enter into a gift transaction.

Christian Law (Gift under Christian Law)

Christian law in India does not have a distinct personal law governing gifts. Therefore, gifts made by Christians are generally subject to the Transfer of Property Act, 1882 and other applicable statutory provisions.

Conditions for Valid Gift under Christian Law

The requirements for a valid gift under Christian law are similar to those under Hindu law and the Transfer of Property Act, which include:

Donor’s Capacity: The donor must be competent to make the gift, i.e., they must be of sound mind and not a minor.
Acceptance by the Donee: The donee must accept the gift during the lifetime of the donor.
Delivery of Possession: The gift must be accompanied by delivery of possession.

Muslim Personal Law (Hiba)

Muslims in India are governed by Hiba, which is the Islamic law on gifts. Under Hiba, gifts can be made orally, provided there is delivery of possession (taking possession of the gift) at the time of the transfer.

No Registration Requirement

Unlike the Transfer of Property Act, the Transfer of Property Act (TPA) does not require gifts under Hiba to be registered. Instead, the transfer is valid as long as the donor intends to make the gift, and the donee accepts it with immediate possession.

Conditions of Validity:

For a gift to be valid under Hiba, it must meet the following criteria:

Intention of the Donor: The donor must intend to make a gift of the property freely, without any expectation of return or consideration.
Delivery of Possession: The donee must take possession of the property at the time of the gift. This possession can be either physical (e.g., the donee physically taking possession of the property) or symbolic (e.g., the donor handing over the keys to the house).
No Formal Deed Required: While the Transfer of Property Act (TPA) requires a formal deed for gifts of immovable property, Hiba does not mandate a formal written document. However, in practice, a written deed may be used to clarify the terms of the gift and avoid disputes.

Parsi Law (Gift under Parsi Law)

Under Parsi Law, gifts are governed by the Parsi Marriage and Divorce Act, 1936, and Indian Contract Act, 1872. Similar to other personal laws, the gift can be made through a deed and must fulfill the essential requirements of intent, acceptance, and delivery of possession.

Comparative Analysis of Gift Provisions in Indian Law

The concept of a gift is regulated by various legal provisions across different statutes in India. While the Transfer of Property Act, 1882 (TPA) primarily governs gifts, other Acts such as the Indian Contract Act, 1872, Indian Registration Act, 1908, and the TPA itself also contain relevant provisions that interact with gift transactions. Below is a detailed comparative analysis of key provisions that govern the validity, execution, and limitations of gifts in India.

1. Section 25 of the Indian Contract Act, 1872: Exception to Consideration Requirement

Section 25 of the Indian Contract Act, 1872 generally stipulates that for an agreement to be enforceable, it must be supported by consideration (i.e., a promise or act of value). However, Section 25 provides an exception to this rule by recognizing gifts as valid even when made without consideration.

Provision Overview:
- This section essentially states that an agreement made without consideration is not enforceable unless it is a gift made voluntarily by one person to another. The key element in such gifts is that they must be executed out of a natural affection, gratitude, or liberality towards the donee.
- Example: A gift made from a father to a son, out of natural affection, is legally valid even though there is no consideration involved.
Key Implication:
- Section 25 reinforces the notion that gifts, being a voluntary transfer of property without the need for consideration, are legally recognized and valid under Indian law. This contrasts with the general requirement in contract law that every contract must have consideration.
- Relevance to Gift Transactions:
  - While gifts under the TPA (sections 122-128) involve voluntary transfers, they differ from contracts in that they are not reciprocal exchanges. A gift can still be enforced in law even without consideration, unlike other contracts where consideration is a critical element.

2. Section 17 of the Indian Registration Act, 1908: Registration of Gift Deeds

Section 17 of the Indian Registration Act, 1908 is a crucial provision in the context of gifting immovable property. It mandates the registration of gift deeds involving immovable property to ensure the legal validity and enforceability of the gift.

Provision Overview:
- Section 17 outlines the requirement for the compulsory registration of documents concerning the transfer of immovable property. This includes gift deeds that transfer ownership of real estate, whether urban or rural. The section states that any instrument of transfer, such as a gift deed, related to immovable property must be registered if the property’s value exceeds ₹100.
- Registration Procedure:
  - A gift deed must be executed in writing, signed by the donor, and attested by at least two witnesses. Once the deed is executed, it must be presented for registration before the relevant sub-registrar under the provisions of the Registration Act.
Key Implication:
- The registration process helps in making the transaction public, thereby ensuring that the gift is valid, and preventing disputes over ownership or encumbrances. Section 17 thus complements Section 123 of the TPA, which mandates the execution of the gift deed through proper documentation and registration for immovable property.
Relevance to Gift Transactions:
- A gift of immovable property without registration does not confer legal ownership on the donee. Registration ensures that the gift is recognized and the donee’s ownership is legally recorded in government records, offering legal protection and clarity in the ownership rights.

3. Section 6 of the Transfer of Property Act, 1882: Prohibition of Transfer of Future Property

Section 6 of the Transfer of Property Act, 1882 plays a key role in regulating the validity of gifts by stipulating that future property cannot be transferred. This section prohibits the transfer of property that does not yet exist, ensuring that gifts are only valid if the property exists at the time of the transfer.

Provision Overview:
- According to Section 6, any transfer of property, whether by sale, mortgage, lease, or gift, that involves property not in existence at the time of the transfer is void. This means that a donor cannot gift property that is expected to come into existence in the future, such as land that is yet to be developed or assets that are not yet acquired.
- Example: A promise to give a piece of land that the donor does not yet own, or property that is contingent on a future event (such as a lottery win), would not constitute a valid gift under Section 6.
Key Implication:
- The section provides clarity on the nature of property that can be transferred through a gift, ensuring that only existing, tangible property can be legally gifted. This prevents any speculative or uncertain transfers that could cause legal confusion or disputes in the future.
Relevance to Gift Transactions:

Section 6 ties directly into the concept of gifts of existing property, which is a key requisite under the Transfer of Property Act. This provision is closely related to the concept of a valid gift, as it rules out the gifting of future property, ensuring that only property with a definite existence and value can be transferred.

Conclusion:

In conclusion, the provisions of the Transfer of Property Act, 1882, provide a clear and structured framework for the execution and enforcement of gifts. By mandating formalities such as registration for immovable property, the transfer of possession, and acceptance by the donee, the Act ensures that gifts are legally binding and that both the donor’s intentions and the donee’s rights are protected. The integration of tax laws, personal laws (such as the Muslim law of Hiba), and provisions from other relevant statutes like the Indian Contract Act and the Indian Registration Act further enhances the legal clarity around gifting processes. For legal professionals, it is critical to maintain a thorough understanding of these interconnected laws to effectively navigate the complexities of gifting transactions and safeguard their clients’ interests, ensuring that gifts are valid, enforceable, and executed in accordance with statutory requirements.