Gift deeds and sale deeds are legal documents involved in the transfer of ownership of property. The basic differences between these two legal documents are how the ownership is transferred and if any amount is involved.
If you deal with legal documents like gift deeds and sale deeds, it is essential to know the difference between them. This article will elaborate on this difference.
Differences Between Gift Deed and Sale Deed
A gift deed comes into play when a property is gifted to a party for free of money, and a sale deed is used when a property is sold to a buyer. The differences between a gift deed and a sale deed can be classified under the following categories:
Transfer of Property Ownership
Gift deeds are usually given out of love, admiration, or good gesture. They ensure the transfer of property ownership without the exchange of any money.
Conversely, sale deeds are legal documents that validate the transfer of property ownership and involve an exchange of an agreed-upon sum of money.
Fees Involved
With gift deeds, certain tax fees could be involved based on the property value.
In sale deeds, the buyer has to pay a specific amount of money to the seller, and stamp duty and registration fees would be involved depending on the market value of the property.
Need for Registration
Registration is not mandatory for gift deeds. However, it is highly recommended as it will provide legal validity to the transfer of ownership.
Registration is mandatory for sale deeds, and it must be carried out at the sub-registrar’s office.
The differences between a sale deed and a gift deed can be summarized as follows:
| Feature | Gift Deed | Sale Deed |
| Transfer of Property Ownership | Includes no exchange of money. | Consists of an agreed-upon amount of money. |
| Finances Involved | It may involve tax fees. | It may involve stamp duty and registration charges. |
| Registration of the Document | Not mandatory. But it is recommended. | It is mandatory to register a sale deed. |
| Usage Scenario | While gifting property. | While selling a property. |
Legal Processes Involved in Drafting a Gift Deed
The legal processes involved in drafting a gift deed include the following:
- Drafting the deed on stamp paper of value based on the property’s value (For example, the stamp paper value should be 5% of the property’s market value.)
- The content of the deed must contain a clear name and other details to identify the donor (giver) and the donee (receiver) of the property. Complete details of the property and the statement of gifting the property must be present.
- The donor and the donee must duly sign the deed.
- Though not mandatory, it is highly recommended that the gift deed be validated to add validity.
- Registration of gift deeds is also not mandatory. However, registering the gift deed with a sub-registrar’s office will provide strong legal protection to the donee’s claim to the property ownership.
You can hire a lawyer to draft the deed and ensure it contains all the necessary details.
Legal Processes Involved in Drafting a Sale Deed
The legal processes involved in drafting a sale deed include the following steps:
- The deed must contain the details of the buyer and seller, the property under sale, the sale price, payment mode, and other relevant information.
- The seller must provide the encumbrance certificate from the government, ensuring that the property is free from any legal claims or dues.
- A No Objection Certificate (NOC) must be provided when the property falls under the jurisdiction of housing authorities or societies.
- After the buyer pays the agreed-upon amount, both the seller and the buyer must sign the deed in the presence of witnesses.
- Finally, the sale deed has to be registered with the sub registrar’s office of the property’s jurisdiction. As per the government regulations, appropriate stamp duty and registration fees must also be paid.
A lawyer can help you in drafting a sale deed effectively.
Pros of a Gift Deed
The advantages of a gift deed include the following:
- Transfer of ownership during the owner’s lifetime.
- Potentially minimize family disputes over property ownership.
- Potential tax benefits.
- Option to retain certain rights.
Cons of a Gift Deed
The disadvantages of a gift deed are as follows:
- Ownership cannot be transferred once revoked.
- Tax implications may be associated with the gifting of properties.
- Relinquishing of all the rights related to the property.
- Possibilities for coercion into drafting the gift deed.
Pros of a Sale Deed
The advantages of a sale deed include the following:
- Transfer of ownership in a clear manner.
- Offers legal security for the buyer.
- Provides transparency in the details of the transaction.
Cons of a Sale Deed
The disadvantages of a sale deed are as follows:
- It can involve certain costs.
- The property may be subject to capital tax.
- The sale process can be time-consuming.
Conclusion
Gift deeds and sale deeds are effective legal documents in determining the transfer of ownership of a property if done clearly and with proper legal binding. Ensure the details of the transaction are highlighted in a clear manner and the documents are duly signed and notarized.
Registration of the documents also provides sound legal protection to the property ownership transaction process executed. To learn more about the details of gift and sale deeds, you can also contact a local sub-registrar’s office.
FAQs
A will helps in distributing or transferring the property after the owner’s demise. In contrast, a gift deed ensures that property ownership is transferred during the owner’s lifetime. So, depending on the preference for the timing of the transfer of property ownership, a will or a gift deed will come in handy.
A gift deed is considered strong when it is bound legally in a sound manner. Draft the gift deed clearly, with proper signatures, notarization, and registration.