Gift Deed vs Sale Deed in Karnataka: Cost, Tax and Buyer Checks
Property changes hands within a family either by sale or by gift, and each route needs its own registered deed. The difference is payment: a sale is made for a price, and a gift is made without one. This guide compares the two in Karnataka on cost, tax and legal effect, and lists the checks for a buyer whose seller received the property as a gift.
How the Two Deeds Differ
A sale deed transfers ownership against a price, whether paid in full or partly promised. It is the document behind almost every purchase from a builder or a previous owner. In a gift, the owner (the donor) hands the property to the donee of free will and takes nothing in return.
The Transfer of Property Act, 1882 sets three conditions for a gift of land or a building. The deed must be signed by the donor, attested by two witnesses and registered. Acceptance by the donee during the donor's lifetime completes the gift, and it is normally written into the deed.
| Point | Gift deed | Sale deed |
|---|---|---|
| Payment | A transfer made free of any price | A price, recorded in the deed |
| Usual parties | Family members | Any seller and buyer |
| Stamp duty in Karnataka | A fixed amount for listed family members; the sale rate for anyone else | 2% to 5% of the value by slab, plus cess and surcharge |
| Fee for registration | Rs. 1,000 flat for listed family members | 2% of the value |
| Tax on the recipient | Free of income tax when the donor is a relative | The buyer has no income to declare |
| Reversal | Only on a condition written into the deed, or through a court | Only through a court |
What a Gift Costs to Register
Article 28 of the state's Stamp Act of 1957 sets the duty on a gift, and the amount turns on who receives the property. Where the donee is outside the family, duty is levied at the conveyance rate on what the property is worth. A gift to a family member carries a fixed duty that depends only on where the property is located:
- Rs. 5,000 within the Bangalore city corporations, the BMRDA area and other city corporations
- Rs. 3,000 where the local body is a municipal council (city or town) or a town panchayat
- Rs. 1,000 for property anywhere else
Cess and surcharge are added to the duty, and registering a family gift costs a flat Rs. 1,000 in fees. The value of the property plays no part, so a flat worth Rs. 2 Crore pays the same duty as one worth Rs. 50 Lakhs.
Who counts as family
The concession covers a fixed list of relations, and the list is narrower than everyday usage. It is limited to the following:
- Father and mother
- Husband and wife
- Son and daughter
- Daughter-in-law
- Brother and sister
- Grandchildren
A son-in-law, nephew, niece, cousin or friend is outside the list, and such a gift pays the full rate. The sub-registrar asks for proof of the relationship, such as Aadhaar, a ration card or a family tree certificate.
What a Sale Deed Costs
A sale deed is charged on the higher of the price in the deed and the guidance value. Stamp duty is 2% up to Rs. 20 Lakhs, 3% above Rs. 20 Lakhs up to Rs. 45 Lakhs and 5% above Rs. 45 Lakhs. Cess at 10% and surcharge at 2% are then added on the duty, which takes the 5% rate to 5.6%. The registration fee is 2%, and it was 1% until 31 August 2025.
On a flat valued at Rs. 1 Crore, the figures work out as shown below:
- Sale deed: Rs. 5.6 Lakhs as stamp duty and Rs. 2 Lakhs as registration fee, a total of Rs. 7.6 Lakhs
- Gift to a person outside the family list: the same Rs. 7.6 Lakhs
- Gift to a listed family member in Bangalore: Rs. 5,000 of duty, Rs. 600 of cess and surcharge and Rs. 1,000 of registration fee, a total of Rs. 6,600
The gap explains why families prefer the gift route. It also explains why a "sale" to a relative at a token price saves nothing, since the duty is charged on the guidance value in any case.
Income Tax Treatment
When the donor is a relative, the donee pays no income tax on the property, however valuable it is. The income tax list of relatives is wider than the stamp duty list and includes the spouse, brothers and sisters, lineal ascendants and descendants, along with the spouses of these persons. Where the donor is unrelated, the stamp duty value is added to the donee's income once it crosses Rs. 50,000.
The donor pays no capital gains tax, since tax law does not count a gift as a sale. When the donee sells later, the donee steps into the donor's shoes for both the purchase cost and the period of holding. A daughter who sells a flat her father bought in 2008 therefore computes a long-term gain on his original cost.
One rule catches gifts between spouses and to a daughter-in-law. Rent or other income from the gifted property continues to be taxed in the hands of the donor. In a sale, the seller pays capital gains tax and the buyer of a property priced at Rs. 50 Lakhs or more deducts 1% tax at source.
Can a Gift Be Taken Back?
A registered and accepted gift is final. The Transfer of Property Act permits revocation only where the deed itself names an event on which the gift ends, and that event cannot depend on the donor's wish alone. A gift obtained through fraud, coercion or undue influence may also be set aside by a court.
The Maintenance and Welfare of Parents and Senior Citizens Act, 2007 adds one more ground. Where a senior citizen transfers property on the condition that the recipient will provide basic needs, and the recipient fails to do so, the tribunal may declare the transfer void. Parents who gift a home often keep the right to live in it for life, and that right should be written into the deed.
Choosing Between the Two
The gift route fits cases with no payment at all, such as a parent handing a home to a son or daughter, or one spouse adding the other as owner. Whenever a price is actually paid, even between relatives, the transaction belongs in a sale deed. Recording a paid transaction as a gift misstates the facts and leaves the buyer without proof of payment.
A will is the third option for family property. It costs little, operates only once its maker has died and stays open to change until then, while a gift transfers ownership at once and for good. A buyer taking a home loan should also note that banks lend on a purchase, so a loan-funded transfer within the family is done as a sale, with the EMI worked out on our EMI calculator.
Buying a Property the Seller Received as a Gift
Many resale homes in Bangalore carry a gift deed somewhere in the title chain. The deed is a valid link when it is properly made, and a buyer confirms that with these checks:
- Registration of the gift deed, with a certified copy taken from the sub-registrar
- The donor held clear title on the day the gift was made, shown by the earlier sale deed or mother deed
- The donee's acceptance is recorded in the deed
- The deed carries no life interest, right of residence or condition for revocation, or the holder of that right joins the sale deed
- The relationship stated in the deed falls within the family list, so the duty paid was correct
- The encumbrance certificate, starting from the gift, shows no cancellation deed or court order
- The e-khata and tax receipts are in the donee's name
- The property was the donor's own and not undivided ancestral property in which other heirs hold shares
A lender's legal team runs the same checks before it approves a loan on such a property. A written opinion from a property lawyer before the advance is paid settles any doubt about a condition in the deed. Our team is available through the contact page for help with a resale shortlist.
