News: Gift Deed vs Will: Law and Tax Differences Explained-15-03-2026

A gift deed transfers an asset voluntarily and without consideration during the owner’s lifetime. A Will is a legal declaration of how assets should be distributed after death. The choice affects costs, control and tax.

Take Ramesh Mehta, a 68-year-old retiree who wants his Rs 2 crore house to go to his daughter Neha. With a gift deed, the house becomes hers as soon as the document is registered and accepted, but he must pay stamp duty and registration charges and ceases to be the legal owner. With a Will, the transfer happens only after his death, he can revise it at any time and no stamp duty is due, though other heirs may in some cases challenge it.

Kunal Savani, Partner, Cyril Amarchand Mangaldas, said Wills take effect only on the testator’s death, can be changed any time before that and, most importantly, attract no stamp duty. Stamp duty on gift deeds is mandatory.

Under Section 123 of the Transfer of Property Act, a gift of immovable property must be made by a registered instrument attested by at least two witnesses. Adhiraj Harish, Partner, D.M. Harish & Co, said stamp duty and registration charges depend on state laws and may vary with the donor’s relationship to the donee and whether the property is commercial or residential.

On tax, Savani said gifts to "relatives", for which the Income Tax Act, 1961 provides an exhaustive list, are exempt under Section 56(2)(x), while gifts to non-relatives are taxable if certain conditions are met. Property received through a Will is not taxed. Tax arises only when the property is later sold.

For capital gains on the sale of assets received by gift or Will, the taxpayer takes the original owner’s cost of acquisition and holding period. Savani said the gains are then treated as long-term or short-term depending on that holding period and taxed at applicable rates, plus surcharge and cess.

An owner who gifts property loses control of it during his or her lifetime. To protect themselves, donors can reserve a right to reside or add similar conditions, such as lifetime residence rights, the right to rental income, restrictions on sale or transfer, a requirement of maintenance support, or reversion of the gift if obligations are not met.

Harish said an owner who expects a dispute among legal heirs and fears the Will may be challenged can consider transferring the property by gift instead.