Choose a gift deed when you transfer property to a close family member for love, not money: many states charge concessional stamp duty, and a gift to a defined “relative” is exempt from income tax in the receiver's hands. Choose a sale deed for an arms-length transfer at a price. Both must be registered.
A father in Pune wants to pass his flat to his daughter. His broker says “just sell it to her for one rupee.” His chartered accountant says “use a gift deed.” Who is right? The choice between a gift deed and a sale deed changes your stamp duty, your tax, and whether the transfer can ever be undone. This guide compares the two instruments and gives you a clear decision rule.
A gift deed transfers property voluntarily and without any money changing hands, from a donor to a donee who accepts it. A sale deed transfers ownership in exchange for a price that is paid or promised. The defining difference is consideration: a sale has a price, a gift has none. That single fact drives every downstream difference in duty, tax, and revocability.
Both instruments live in the Transfer of Property Act, 1882.
On the tax side, the Income-tax Act, 1961 treats the two very differently. Under Section 56(2)(x), property received without consideration from a person who is not a “relative” is taxable as income in the receiver's hands once the value crosses a specified threshold (commonly cited as ₹50,000). But a gift received from a “relative” as defined in the Act, which includes spouse, siblings, parents and other lineal ascendants and descendants, is exempt, whatever its value. When gifted property is later sold, Section 49(1) and Section 2(42A) carry forward the previous owner's cost and holding period for computing capital gains, so the donee does not get a “stepped-up” cost.
Stamp duty is a state subject, so there is no single national rate. The pattern across states is:
Always check your state's stamp schedule before deciding. A gift to a stranger usually gets no concession and may cost as much as a sale.
Real-life example. Ramesh, a retired teacher in Nagpur, wanted to transfer his second flat to his son Aman in early 2026. A property agent suggested a sale deed at the circle rate of about ₹40 lakh, which would attract full stamp duty. His CA instead drafted a gift deed describing the transfer as without consideration, out of natural love and affection, signed before two witnesses and registered at the sub-registrar. Because Aman is a son and therefore a “relative”, the gift was not taxable in his hands, and Maharashtra's concessional treatment for gifts to a close relative kept the stamp cost far below the full ad valorem duty a sale would have triggered. Ramesh then filed for mutation so Aman's name reflected in the municipal records.
Want help drafting an RTI to your sub-registrar to check registration status, fee rules, or mutation backlog? Use the AI RTI Drafter to write a clean request, or the AwaazRTI voice tool if you prefer to dictate it.
Often yes, when the gift is to a defined close relative, because many states levy concessional or nominal stamp duty on such gifts while a sale deed attracts full ad valorem duty. Check your own state's stamp schedule, as rates and the relative list differ by state.
Yes. Under Section 123 of the Transfer of Property Act, 1882, a gift of immovable property is valid only if made by a registered instrument signed by the donor and attested by at least two witnesses. An unregistered gift of land or a flat is legally ineffective.
A gift from a “relative” as defined in the Income-tax Act, 1961, which includes spouse, siblings, parents and other lineal ascendants and descendants, is exempt regardless of value. A gift from a non-relative is taxable as income under Section 56(2)(x) once the value crosses the specified threshold.
Not freely. Section 126 of the Transfer of Property Act lets a gift be revoked only on a specified event agreed by both parties, or on grounds on which a contract could be rescinded such as fraud or coercion. A gift made revocable at the donor's mere will is void.
Under Section 49(1) and Section 2(42A) of the Income-tax Act, the previous owner's cost of acquisition and holding period are carried forward, so capital gains are computed from the donor's original cost, not the value on the gift date.
A nominal “one rupee” price is a sham sale that can attract tax and stamp scrutiny and loses the gift's advantages. If no real money changes hands, a properly drafted and registered gift deed is the correct instrument.
A gift of immovable property must be attested by at least two witnesses under Section 123. In practice both gift and sale deeds are registered before the sub-registrar with the parties appearing in person, giving biometrics, and producing identity proof.
No. Registration records the deed at the sub-registrar's office. Mutation updates the owner's name in municipal and revenue records for property tax and land records. You must apply for mutation separately after registering either deed.