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Can You Sell a Gifted Property

Manoj Kumar recently gifted his sister, Swati Kumar, a 2 BHK apartment in Mumbai. As she is his blood relative, Manoj completed the transfer through a gift deed by paying a nominal stamp duty of ₹200 and a 1% registration fee based on the property value. Now, Swati wants to sell the property but wonders is it legally allowed to sell a property received as a gift? Many people share this confusion. In this PropertyGeld guide, we ll explain the legal aspects of selling a gifted property, including tax implications, documentation, and conditions to watch out for. What is a Gift Deed? A gift deed is a legally binding document used when someone voluntarily transfers property ownership to another person without any exchange of money. The person giving the property is called the donor, while the one receiving it is known as the donee. Just like a sale deed, once a gift deed is registered, it generally cannot be revoked unless there s proof of coercion or fraud involved during its execution. Is a Registered Gift Deed Valid? Yes, a properly registered gift deed holds legal validity indefinitely unless there's a dispute where it is proven that the donee acted dishonestly or the gift was forced. In that case, the donor may legally reclaim the property. According to the Transfer of Property Act, 1882, a gift deed is valid when: The property exists at the time of gifting. The gift is made voluntarily, without monetary consideration. Can a Gifted Property Be Sold? Yes, a property received through a gift deed can be sold by the donee, provided there are no restrictive clauses in the deed. Once registered in the donee s name, the gift deed gives them full ownership similar to a property purchased through sale. They are free to sell the property at their discretion, unless limited by specific conditions in the document. When Can a Donee NOT Sell a Gifted Property? There are certain scenarios where the donee cannot legally sell the property, such as: If the gift deed contains a clause prohibiting the sale for a specific period (e.g., 5 or 10 years) or indefinitely. If the property is not registered, the donee does not have legal ownership, and therefore cannot sell it. If the donee sells the property despite a restriction, the donor has the legal right to revoke it. This also puts the buyer at risk of losing the property. Capital Gains Tax on Sale of Gifted Property Selling a gifted property can attract Long-Term Capital Gains (LTCG) Tax if it is held for more than 2 years. For gift deeds executed before July 23, 2024, the LTCG tax can be paid at: 20% with indexation, or 12.5% without indexation The cost of acquisition for tax calculation is considered as the price at which the donor originally purchased the property not its current market value. LTCG = Sale Price (Original Purchase Price + Improvement Costs) Documents Needed to Sell a Gifted Property Here s a checklist of documents required to sell a gifted property: Registered gift deed Original sale deed and title documents PAN and Aadhaar of both seller and buyer Donor and donee identity details Any home loan closure letters (if applicable) Key Checks for Buyers of Gifted Properties If you re planning to buy a gifted property, ensure the following to avoid legal hassles: The gift deed must be registered under the Registration Act, 1908. The stamp duty must have been duly paid by the donor. The gift deed should not contain any clauses that restrict resale. Ensure that the property documents are complete and include: Property title Encumbrance certificate (to verify no legal disputes or pending loans) Mutation records Verify that the seller has the legal right to sell the gifted property without restrictions. Clauses That Restrict Sale of Gifted Property As per Section 126 of the Transfer of Property Act, the following clauses, if present in the gift deed, can prevent resale: The deed explicitly prohibits the sale or transfer for a defined or indefinite period. The property is unregistered, making the gift legally incomplete. The deed mentions reversion to the donor if the donee attempts to sell. In such cases, the donee must consult a legal expert to evaluate their options before making a sale. Final Word from PropertyGeld Yes, selling a gifted property is entirely legal, as long as it is properly registered and free from restrictive conditions. Whether you re a property owner who received a home as a gift or a buyer considering such a property, it's important to understand the legal framework, tax rules, and documentation involved. At PropertyGeld, we encourage informed decisions that protect both sellers and buyers. When in doubt, consult a property legal expert to ensure your transaction is smooth and risk-free.