What is a WILL and a gift deed?
A WILL is made by the testator while alive and comes into effect after his/her demise.
A gift under Section 122 of the Transfer of Property Act is a transfer of asset/property by a donor (asset owner) out of his own free WILL (voluntarily and Willingly) to a donee (recipient) without any consideration.
Gift Deed vs WILL:
You can take recourse to gift deed or WILL to transfer property to any of your relatives such as children or spouse. However, both these options have their own merits. Apart from this, taxation is also an important point. If you want to understand the difference between gift deed and WILL in simple words, then it can be said that if someone wants to transfer property immediately, then it can be done through gift deed. Whereas property is transferred only after death through a WILL. Which option to choose in gift deed or WILL to transfer property, it is important to consider many aspects apart from tax.
A gift deed requires to be stamped and registered, whereas, a WILL need not be stamped or registered.
The option of gift deed can be adopted for immediate property transfer whereas property transfer takes place only after death through via WILL.
In some cases, it has been heard that children were thrown out of the house by the children on transfer of property through gift deed and they are somehow making their living. In such a situation, tax and investment expert Krishan Joshi says that if there is no great need like in many cases it is necessary to transfer the property immediately, then except in such cases, the property should be transferred only through a WILL so as to evict from one’s own property. Don’t let it happen.
Are Gift deeds/WILL taxable?
Under the Income Tax Act, gifts between specified relatives i.e. – between spouses, from parents to children (including step children and adopted children), among siblings or any other lineal ascendants or descendants — are fully exempted from tax, but need to be documented through a deed if the value of the gift is above Rs.50,000.
A WILL is not required to be registered, due to which it is a cheap way to transfer property, but it should be registered to avoid any problems related to succession. There is no tax liability on transfer of property through a WILL and no tax liability is applicable on transfer of property through gift deed also to relatives like spouse or children. This is how tax liability arises on gifting to non-relatives.