REG 065 Gift Deed and Settlement Deed — Law of Registration Notes for Judiciary

The Gift Deed and the Settlement Deed Distinguished: Two Present Dispositions That Differ in Purpose and in the Class of Beneficiary

A gift and a settlement are both inter vivos dispositions. Both take effect at once, both must be registered, and both leave the maker unable to change his mind. The distinction between them is therefore not about timing, which is where the gift and the will differ, but about purpose and beneficiary. A gift is any voluntary transfer without consideration, to anybody at all, and is defined by the Transfer of Property Act. A settlement is a disposition made for a defined set of purposes, in consideration of marriage, to provide for the settlor's family or dependants, or for a religious or charitable object, and its definition comes from the stamp legislation. The two overlap a great deal, and where they do, the label matters chiefly for attestation and for duty.

The two compared, and the area in which the same document answers both descriptions

1. The Gift

Sections 122 and 123, Transfer of Property Act, 1882

122. "Gift" defined. "Gift" is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee during the lifetime of the donor and while he is still capable of giving.

123. Transfer how effected. For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

The donee may be anyone, including a complete stranger to the family. Nothing in Section 122 restricts the class.
There must be no consideration at all. A recital of natural love and affection is a motive, not consideration, and does not spoil the gift. If consideration passes, the document is a sale or an exchange, whatever it is called.
Acceptance is essential, and a gift never accepted during the donor's lifetime is void.
Attestation by two witnesses is required by statute, and its absence is fatal.
Registration is compulsory whatever the value, under Section 17(1)(a) of the Registration Act, which carries no threshold.
Revocation is confined to Section 126: on an agreed event which does not depend on the will of the donor, or on any ground on which a contract could be rescinded. A clause reserving a general power of revocation is void to that extent.

2. The Settlement

Section 2(24), Indian Stamp Act, 1899, in substance

"Settlement" means any non testamentary disposition, in writing, of movable or immovable property made:

(a) in consideration of marriage;

(b) for the purpose of distributing property of the settlor among his family or those for whom he desires to provide, or for the purpose of providing for some person dependent on him; or

(c) for any religious or charitable purpose;

and includes an agreement in writing to make such a disposition, and, where any such disposition has not been made in writing, any instrument recording, whether by way of declaration of trust or otherwise, the terms of any such disposition.

The definition is purposive. It is the object of the disposition that makes it a settlement, not its form.
The class of beneficiary is limited to the settlor's family, those for whom he desires to provide, his dependants, or a religious or charitable object. A disposition to a stranger for no such purpose is not a settlement.
Marriage is expressly a consideration. That is why a settlement made in consideration of marriage is a settlement and not a gift: consideration has passed in the legal sense, and a gift by definition has none.
It is non testamentary, and operates in praesenti, which is why it is compulsorily registrable under Section 17(1)(b) where the value is one hundred rupees or more.
No attestation is required by statute, though it is universal in practice.
It is irrevocable unless a power of revocation is reserved in the deed itself.
The definition also reaches a memorandum recording an oral disposition, which is a departure from the usual rule and is a creature of the stamp legislation rather than of the Registration Act.

3. The Two Compared

	Gift deed	Settlement deed
Defined by	Section 122 of the Transfer of Property Act, 1882	Section 2(24) of the Indian Stamp Act, 1899
When it operates	At once, on registration and acceptance	At once, on execution and registration
Who may take	Anyone, including a complete stranger	The settlor's family, his dependants, those for whom he desires to provide, or a religious or charitable object
The defining feature	Absence of consideration	The purpose of the disposition
Consideration	There must be none	The purpose is the consideration; marriage is expressly one
Registration	Compulsory whatever the value, Section 17(1)(a)	Compulsory above one hundred rupees, Section 17(1)(b)
Attestation	Two witnesses, required by Section 123	Not required by statute
Acceptance	Essential during the donor's lifetime, Section 122	Not a statutory requirement
Revocation	Only within Section 126 of the Transfer of Property Act	Irrevocable unless a power of revocation is reserved in the deed
Life interest	May be reserved without affecting validity	May be reserved; the remainder passes at once
Stamp duty	Ordinarily at conveyance rates, with State concessions for transfers within a family	A separate article in most State schedules, often at a lower rate
Can it be oral?	Not for immovable property; Section 123 requires a registered instrument	Not for immovable property; but the stamp definition reaches a memorandum of an oral disposition

4. Where the Two Overlap

A very common document falls squarely within both definitions: a transfer by a father to his children, without consideration, to provide for them. It is voluntary and without consideration, so it answers Section 122. It is a non testamentary disposition for the purpose of distributing property among his family, so it answers Section 2(24) of the Stamp Act. The question is then what turns on the choice of label, and the answer is narrower than people expect.

What turns on the label	What does not
Attestation. A gift deed requires two attesting witnesses under Section 123, and a document that is in substance a gift will fail without them. A settlement deed does not	The requirement of registration. Both are compulsorily registrable, one under clause (a) and one under clause (b)
Stamp duty. Most State schedules carry a separate article for a settlement, and often a concessional rate for a settlement or gift within the family. The rates can differ substantially	The timing. Both operate in praesenti
Acceptance. A gift is void without acceptance during the donor's lifetime; a settlement has no such statutory requirement	Revocability. Neither may be revoked at the maker's pleasure
The grounds of revocation. Section 126 governs a gift; a settlement is revocable only if the deed reserves the power	The effect on title. Both transfer, and both need registration to do so

⚠ Calling it a settlement does not escape the attestation requirement

The practical danger runs in one direction. Where a document is in substance a gift, that is, a voluntary transfer without consideration, it must satisfy Section 123, and two attesting witnesses are essential however the deed is headed. A deed styled a settlement, drawn without attesting witnesses, and in truth a gift to a family member, is exposed to the argument that it fails under Section 123. The registering officer will not raise the point; it surfaces years later when the title is examined or the transaction is attacked. The safe course is to attest every deed of this kind by two witnesses, whatever it is called, since attestation costs nothing and its absence can be fatal.

5. The Third Member of the Family: The Will

Gift, settlement and will are usually met together, because they are the three ways a person disposes of property to his family. Setting the three out at once fixes the architecture.

	Gift	Settlement	Will
Character	Inter vivos transfer	Inter vivos disposition	Testamentary
When it operates	At once	At once	On death
Revocable	Only within Section 126	Only if the power is reserved	At any time, Section 62 of the Succession Act
Registration	Compulsory, any value	Compulsory above Rs. 100	Optional
Attestation	Two witnesses, Section 123	Not required by statute	Two or more witnesses, Section 63
Acceptance	Essential	Not required	Not required
Who may take	Anyone	Family, dependants, or a charitable object	Anyone
Stamp duty	Payable	Payable, often at a lower article	None
Maker's control afterwards	None, beyond a reserved life interest	None, beyond what the deed reserves	Complete, until death

6. Substance Against Label

1. The name of the document decides nothing about registration. The requirement is determined by what the instrument does, and a deed called anything at all that transfers immovable property must be registered.

2. A "settlement" to take effect on death is a will, and is governed by the Indian Succession Act, 1925, with attestation under Section 63 essential and registration optional.

3. A "gift" for consideration is a sale or an exchange, and attracts conveyance duty accordingly.

4. A "settlement" in favour of a stranger for no family or charitable purpose is not a settlement within the stamp definition, and is a gift if gratuitous.

5. A deed reserving a general power of revocation is not thereby testamentary, but the reservation is void as to a gift under Section 126 and is effective for a settlement only if the deed says so clearly.

6. The registering officer does not decide any of this. His enquiry under Section 34 is confined to execution and identity, and the character of the document is decided later, by a civil court or by the stamp authority.

7. The Position Stated Shortly

1. A gift and a settlement are both inter vivos dispositions taking effect at once, and both require registration.

2. A gift is defined by Section 122 of the Transfer of Property Act as a voluntary transfer without consideration, accepted during the donor's lifetime.

3. A settlement is defined by Section 2(24) of the Indian Stamp Act as a non testamentary disposition in consideration of marriage, for the settlor's family or dependants, or for a religious or charitable purpose.

4. A gift may be to anyone; a settlement is confined to the class of beneficiary the definition names.

5. A gift must have no consideration; in a settlement the purpose is the consideration, and marriage is expressly one.

6. A gift of immovable property must be attested by two witnesses under Section 123; a settlement need not be attested by statute.

7. A gift is void without acceptance; a settlement has no such statutory requirement.

8. A gift is registrable whatever the value under Section 17(1)(a); a settlement above one hundred rupees under Section 17(1)(b).

9. A gift is revocable only within Section 126; a settlement only if a power of revocation is reserved in the deed.

10. Most State schedules carry a separate stamp article for a settlement, often at a lower rate, and that is where the practical difference lies.

11. Where a document is in substance a gift, Section 123 applies whatever it is called, so two attesting witnesses should be taken in every case.