Quick answer: A gift deed transfers property without payment, usually between family members. A sale deed transfers it for an agreed price. A sale deed must be registered and carries stamp duty and registration fees on the property value. A gift deed of immovable property should be registered too. A completed gift cannot be taken back, so be sure before you sign.
Gift deeds and sale deeds are among the very important legal deeds used to transfer the ownership of a property. The biggest difference between them is how they break down the transfer and whether or not there’s money involved.
For instance, when you’re the one signing gift or sale deeds, you should know if there’s a difference. In this article, we are going to compare the two in detail.
Gift Deed vs Sale Deed.
If you gift any property with value then you use a gift deed but if you sell any property at a certain amount then you use the sale deed. These key differences can be classified into the following categories:
Transfer of Property Ownership
Making gift deeds calls for love, esteem, or in great good faith so that property ownership is transferred without cost to the treasury.
However, sale deeds must include an exchange of money and the transfer of ownership is legalised after the agreed sale price has been fulfilled.
Fees Involved
Depending on property value, gift deeds may mean certain tax fees. When transferring property by sale deeds, the buyer must pay the seller and stamp duty and registration fees at the market value of the property.
Need for Registration
A gift deed of immovable property should be registered. The Transfer of Property Act requires such a gift to be made by a registered document that is signed by the donor and attested by witnesses, so an unregistered gift deed is risky. Sale deeds, for instance, have to be registered and done at the office of sub registrar’s.
Comparison Table: Gift Deed vs Sale Deed
| Feature | Gift Deed | Sale Deed |
| Transfer of Property Ownership | No exchange of money involved | Involves an agreed-upon payment |
| Finances Involved | May involve tax fees | Includes stamp duty and registration charges |
| Registration | Required for immovable property | Mandatory |
| Usage | When gifting property | When selling property |
When is a gift deed used?
A gift deed is mostly used inside the family. A parent may give a house or plot to a son or daughter, a husband may give property to his wife, or a relative may pass on land during their lifetime. No money changes hands, and the donor gives up all rights in the property from the day the deed is completed. The person who receives the property, the donee, must accept it.
A sale deed is used when the property is bought. The buyer pays the agreed price, and ownership moves to the buyer when the deed is signed and registered. Banks, builders and authorities always ask for a registered sale deed as proof of title.
Gift deed or will: which is better?
Both can pass property to a family member, but they work differently. A gift deed takes effect now and the donor cannot take the property back. A will takes effect only after death, and the owner can change it any time before that. If you want to keep control of the property during your lifetime, a will is the usual choice. If you want the person to own it now, use a gift deed. See the FAQs below for the short version.
Legal Processes in Drafting a Gift Deed
The legal process for drafting a gift deed involves several steps:
Stamp Paper: Deed should be prepared on stamp paper of the value your state requires. The duty depends on the state and often on the relationship between donor and donee, so check with the sub-registrar office.
Details of Donor and Donee: Greedily (or otherwise) identify the give (donor) and take (donee).
Property Description: Property details should be complete and a statement of gifting.
Signatures: Both sign the deed.
Registration: Register the gift deed at the sub-registrar office. For immovable property it is what makes the gift valid and protects you if anyone disputes it later.
Legal Processes in Drafting a Sale Deed
Drafting a sale deed follows these steps:
Details of Buyer and Seller: Provide the information about the property, sale prices and also on payment methods.
Encumbrance Certificate: You need to establish the seller confirms that the property is free from legal claims by providing this.
NOC: For a property which is under housing authority jurisdiction, a No Objection Certificate (NOC) is needed.
Payment and Signatures: After the buyer pays they sign the deed, in the presence of witnesses.
Mandatory Registration: Even if the woman is the first owner, she will have to register the deed with the sub-registrar office, and pay stamp duty and registration fees.
Pros of a Gift Deed
- They transfer ownership during the donor’s lifetime.
- It may reduce squabbles between families over ownership.
- Possible tax benefits.
- Some rights may remain reserved with the donors.
Cons of a Gift Deed
- Once a gift is given ownership cannot be reclaimed.
- Tax implications may apply.
- The donor gives up all the property rights.
- Drafting has the possibility of coercion.
Pros of a Sale Deed
- It guarantees clear rights transfer.
- This legal protection is provided for the buyer.
- It enhances transparency within the transaction process.
Cons of a Sale Deed
- Involves various costs.
- The property can be taxable by capital gains tax.
- The process of selling can be long.
Documents usually needed
The exact list depends on your sub-registrar office, so ask before you go. In general, expect to need:
- The existing title papers of the property, such as the earlier sale deed.
- Identity and address proof of both parties, and photographs.
- A clear description of the property, with its address and boundaries, as it appears in the title papers.
- Witnesses who will sign the deed.
- For a sale, an encumbrance certificate and, where the plot is under an authority, a no objection certificate, as listed above.
What to do after the deed is registered
Registration is not the last step. Get the property records changed to the new owner’s name, which is called mutation. Do it with the local authority or revenue office, and then update the property tax and utility accounts. Without mutation, the records still show the old owner, and that creates trouble when you sell, take a loan or apply for building approval.
Common mistakes to avoid
- Leaving the gift deed unregistered: a signed paper alone is weak proof for immovable property.
- Vague property description: a wrong plot number or boundary leads to disputes. Copy the description from the title papers.
- Not checking the title: a donor can only give what he owns. Check the ownership papers even for a family gift.
- Pressure on the donor: a deed signed under pressure can be challenged. The donor should sign freely and understand what is given up.
- Ignoring tax: a sale can attract capital gains tax and a gift may have tax effects for the receiver. Ask a chartered accountant before you decide.
- Skipping mutation: see above.
Which one should you choose?
Use a sale deed when property is bought for a price. Use a gift deed when you want to give property to someone without payment and are sure you will not want it back. If you are unsure, speak to a property lawyer first, because a registered deed is hard to undo.
Conclusion
There are gift and sale deeds, both of which are essential in transferring ownership of property, so long as they’re drafted properly and legally. The registration of these documents also provides a layer of protection to the ownership transfer process. Walls and Dreams If you want to study the nuances of these deeds, you may contact your local sub-registrar’s office or a legal expert.
Stamp duty rates vary by city, so see stamp duty and registration charges in Noida and Greater Noida and how to claim a stamp duty refund. For the value used to calculate it, read about guidance value of a property. If you are buying rather than receiving, our guide to buying land in Noida lists the checks, and what is jamabandi explains land records. If you plan to build on the property you receive, see our construction company page.
FAQs
Which is better: a will or a gift deed?
A will passes property after death and a gift deed passes property during the owner’s lifetime. It all comes down to your preference of when to transfer ownership.
How strong is a gift deed?
If all these are done properly, i.e. gift is properly drafted, signed, notarized and registered, it is a strong gift deed.
