Gifting an Apartment This Valentine's Day: What You Need to Know
Considering surprising your spouse with a luxurious apartment this Valentine's Day? While this extravagant gesture demonstrates significant affection, there are crucial financial and legal aspects to consider before finalizing such a generous present.
Completion Status and GST Implications
Opting for a completed apartment over an under-construction one offers significant financial advantages. Purchasing a ready-to-move-in apartment with an occupancy certificate exempts you from paying the 5% Goods and Services Tax (GST), resulting in substantial savings.
Tax Implications for Gifting Property
The recipient, in this case, the wife, is not obligated to pay taxes on the gifted property. However, any income generated from the property, such as rental income, may become part of the husband's taxable earnings, merging with his existing income, according to Sonu Iyer, Partner at People Advisory Services (tax), EY India. Therefore, it is crucial to take into account the long-term financial consequences of such a transaction.
Navigating Gift Deeds, Stamp Duty, and Registration
Gifting property provides financial security but requires careful adherence to legal procedures. The transaction demands a formally written gift deed signed by the husband and witnessed by a minimum of two individuals, clarifies Mona Dewan, Managing Associate at ZEUS Law Associates. “The thing to be kept in mind while making such a transfer is that it has to be effected by way of a written instrument (gift deed) that has been signed by the husband and attested by at least two witnesses.” The gift deed must be registered at the sub-registrar's office, incurring stamp duty and registration fees.
Several states offer stamp duty reductions. Haryana, for instance, provides exemptions for property transferred to a spouse. Maharashtra levies a nominal stamp duty of Rs 200 for residential or agricultural property gifted by a husband to his wife. Uttar Pradesh has capped the stamp duty for such gifts at Rs 5000, a considerable decrease from the previous 7% levy on the property's value or circle rate, whichever was higher.
However, if the recipient sells the gifted property within five years of registration, the reduced stamp duty benefits become void, explains Dewan. Delhi does not offer similar concessions, and stamp duty equates to 2% of the circle rate value, along with transfer duty imposed by the Municipal Corporation of Delhi and registration fees. Accordingly, the reduced stamp duty benefit will not be available if the property received through a gift deed is later by the recipient within five years of the registration date, according to Dewan.
Reciprocal Gifting: Wife to Husband
Similar exemptions in Haryana, Maharashtra, and Uttar Pradesh apply to properties gifted by wives to their husbands. In Delhi, however, the stamp duty rises to 3% of the circle rate value, plus transfer duty and registration fees.
Irrevocable Nature of Gift Deeds
It is crucial to recognize the finality of a registered gift deed. Once executed, the gift becomes legally binding and irreversible. The wife assumes full ownership of the property, and the husband loses the right to revoke the gift, emphasizes Dewan. According to Dewan, this implies that the done, or wife, becomes the owner of the gifted immovable property and that the donor, or husband, typically lacks the right to revoke or cancel such a gift once it has occurred.
Therefore, thoughtful consideration of financial and legal implications is paramount before proceeding with such a generous gesture.