In 2017, when 71-year-old Mandar Bhosle of Mumbai gifted his immovable property to his children out of love, he had not imagined becoming homeless. A year after gifting the house, his son asked Bhosle and his wife to move out. “I had signed the gift deed agreement that my son had prepared. At that time, I did not realise the implications,” says a depressed Bhosle, sitting in an old-age home.
Siddharth Hariani, Partner at Phoenix Legal says that most parents tend to get swayed by their love for their children and gift away their homes. “But they do not seek legal guidance when doing so and then have a feeling of not being treated well by the children,” he adds. Often, elderly parents do not approach legal advisors while signing the gift deed, as they have complete trust and faith in their children or are doing it under the pressure of their kids.
It's important to know how to make a water-tight gift deed that can also be revoked if you feel unwelcome in your own home after gifting it away.
Is using a gift deed advantageous?
A gift deed is an instrument that allows you to transfer a movable or immovable property to the donee (the person receiving the property). In Bhosle’s case, the senior couple chose to gift their house to their children (the donees).
Such a gift deed falls under the ambit of the Indian Contract Act 1872. Also, since the couple gave away an immovable property, the Transfer of Property Act 1882 is also applicable, which entails a written agreement that needs to be stamped, registered and attested by two witnesses. In Bhosle’s gift deed, the two witnesses were his son’s friends.
Why is a gift deed used, rather than an outright transfer, say, though a Will? “The donee receives full exemption from income tax on receiving the property. Also, the donee has to pay marginal amount of stamp duty under the Indian Stamp Act,” says Zulfiquar Memon, Managing Partner, MZM Legal.
The stamp duty amount varies across states. Maharashtra has a cap on stamp duty payable on gifting of residential properties to blood relatives, at Rs 200, irrespective of the value of the property. “Whereas, if you transfer the property through a Will, the stamp duty charges are flat at Rs 75,000 in Mumbai,” says adviser Priyesh Sampat.
Gift deeds also work. Sampat says that through a gift deed, a property gets transferred within a week, whereas it takes about 8-12 months in the case of a Will.
How to make a strong gift deed?
If you must choose the gift deed route to transfer property to your children, make sure your agreement is made in a way that protects you later. “In a gift deed, you must build a condition for the children, asserting that we (parents) have a right to continue using the gifted residential property and that it should be continued till the time we are alive,” says Mayank Mehta, Partner of Pioneer Legal.
Also, try to be a joint holder in the property instead of giving it away entirely. “There is no prohibition in law that donor cannot keep a stake in the property gifted,” says Payal Parikh, Managing Partner, ANB Legal.
How can you revoke a gift deed?
You can revoke the gift deed at a later stage only if there is a specific clause mentioned in the deed. Alternatively, if the gift deed has clauses that specify a child’s duty towards the upkeep and maintenance of their parents with dignity, providing for their basic amenities, fulfilling physical needs and so on and if any of these conditions are not met, the parents can revoke the gift deed.
In such cases, the law considers the gifting as having been done under coercion or undue influence, even without free consent or, worse, fraudulently. Parents can file an application for reclaiming the property at the tribunal court and revoke the gift deed under which it was transferred.
This maintenance tribunal is faster and quicker in resolving such disputes. “Under the welfare act, the tribunal is required to dispose the matter within 120 days of being brought to its notice,” says Hariani.
Make sure that your application clearly demonstrates how the donees (your children) has failed to live up to the terms. Section 23 (1) of the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 ensures that “the senior citizens feel more protected. This act has been successful in taking the senior citizens away from the rigours of long-drawn litigation battles with their children before regular civil courts,” says Memon.
“If the donee is not willing to give back the property gifted, a lawyer can be approached to fight the case in court,” says Parikh. Also, if you are incapable of enforcing your rights for declaration of the transfer of property as void due to illness or aging, it can be executed by an appointed attorney. But, while presenting the facts to the maintenance tribunal, you need to be present.
A will is better than a gift deed
“In a Will, property continues to be in your name, whereas in a gift deed, the property stands in the name of the done, the moment you conclude the gift deed,” says Mehta.
It’s always better to give your house to your children through a Will, instead of a gift deed, especially if you have just one property – the one in which you currently reside.
You may want to experience the joy of giving away your house to your children, but the pleasure can still be yours by doing so via a Will.
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