When it comes to the transfer of property or assets in India, two legal methods are often used: a gift deed and a will. Both methods are used to transfer ownership of the acquired property, but the methods employed, the mechanisms involved, and the legal procedures differ significantly. These methods serve different purposes and also have unique legal implications. If you're curious about what these processes are and how they differ, this blog should be helpful. In this article, we will break down the difference between a gift deed and a will.
A gift deed is a legal document that allows the transfer of property voluntarily. It could either be movable property or immovable property. Gift is governed by the Transfer of Property Act, 1882, from sections 122 to 129. The person who gives the gift is called the donor, and the person who receives it is known as the donee. The key factor is that the transfer is made during the lifetime of the donor, with an immediate effect, upon the execution and registration of the gift deed.
A 'will' is a legal document that lays out how you want your assets (property, money, jewelry, etc.) to be distributed after your death. Amongst whom the assets shall be devolved. The Indian Succession Act, 1925, governs 'will'. Also, personal laws exist, such as the Hindu Succession Act, 1956, and the Muslim law. One who makes the will is known as the testator, and the recipients are known as beneficiaries or legatees. Unlike a gift deed, a will only takes effect after the death of the testator.
While both a gift deed and a will deal with transferring assets, they differ in timing, legal requirements, revocability, and more. Let's delve into the significant differences to simplify and clarify things.
| Gift Deed | Will | |
| Timing of Transfer | The transfer happens immediately during the donor's lifetime. Once the gift deed is signed, registered (for immovable property), and accepted by the donee, the property belongs to the donee. | The transfer only happens after the testator's death. Until then, the testator retains complete control over the assets. |
| Revocability | Generally, a gift deed is irrevocable once completed (i.e., it is signed, registered, and accepted). Section 126 of the Transfer of Property Act allows revocation only in rare cases, such as if the donee commits fraud or if they mutually agree. However, a donor cannot unilaterally revoke a gift; such revocation is legally void. | A will is fully revocable during the lifetime of a testator. They can change, rewrite, or cancel their will as many times as they want. |
| Legal Requirements | It requires some formalities to be completed under the Transfer of Property Act. It must be in writing. At least two witnesses should attest to it. For immovable property, registration with the sub-registrar is mandatory under section 17 of the Indian Registration Act, 1908. The donee must also accept the gift, usually by signing the deed. | A will is much simpler to create. Under section 63 of the Indian Succession Act, it must be in writing, signed by the testator (or someone on their behalf), and attested by two witnesses. Registration is not mandatory; it is optional. However, registering a will can help reduce disputes later. |
| Cost Implications | Involves immediate costs like stamp duty. Stamp duty is a tax levied by the government on legal documents that transfer ownership of property. It is based on the property's market value and registration fees. | Creating a will is almost cost-free. There is no stamp duty, and registration is not mandatory. However, after the testator's death, probate (court approval of the will) may involve fees, especially for high-value estates. |
| Tax Implications | Under the Income Tax Act, 1961 (section 56), gifts are tax-free for the donee if given to specified relatives (e.g., spouse, siblings, parents, or lineal descendants). For non-relatives, gifts that exceed the value of ₹50,000 (whether in cash or property) are taxable as "income from other sources" for the donee. | No tax applies when assets are transferred via a will after death, as it's considered an inheritance. However, income generated from inherited assets (e.g., rent from a house) may be taxable for the beneficiary. |
| Certainty in Transfer and Risk of Disputes | It offers certainty because the transfer is complete during the donor's lifetime. Disputes are rare once the deed is registered, though challenges (e.g., claims of coercion) can arise. | It is more prone to disputes after the death of the testator, as beneficiaries or relatives may challenge its validity (e.g., alleging fraud, undue influence, or mental incapacity). |
| Control Over Assets | The donor loses all control over the property once the gift is complete. | The testator retains complete control until death. |
In a country like India, where property is often a family's biggest asset, understanding gift deeds and wills is crucial. A gift deed offers immediate transfer and peace of mind, while a will provides flexibility and control. Both reflect the balance between personal wishes and legal safeguards. With the rise in property values and complex family dynamics, choosing the right tool becomes critical to prevent disputes and secure the legacy.
Gift deeds and wills are like two sides of a coin, as both deal with asset transfers but differ in timing, control, and process. A gift deed, for instance, is an irrevocable transfer, ideal for giving now. A will is perfect for planning the legacy with flexibility, taking effect only after you are gone. By understanding their differences, rooted in the Transfer of Property Act and Indian Succession Act, one can make informed choices that align with one's goals. For legal assistance, contact us.
