The Bengal government’s decision to cap stamp duty at Rs 1,000 irrespective of the circle rate value on the transfer of property within family as a gift is going to benefit all sections of the society, legal experts and people involved in the real estate business say.

The transfer of property by gift deed within the family attracts a special stamp duty rate of 0.5 per cent of the circle rate value at present. The budget, tabled in the Assembly on Thursday, proposes a flat rate to provide ‘relief’ in property transfer within family.

“As per current rules, the stamp duty payable on any transfer of property through gift within the family is at the rate of 0.5 per cent of the value of the property. In order (to) provide relief in property transfers within the family, I am happy to propose a maximum stamp duty of Rs 1,000 only in case of transfer of property by way of gift within the family,” Chandrima Bhattacharya, minister of state (independent charge) finance department, announced in her budget speech.

Experts say the decision would benefit most who would like to distribute their wealth (immovable property such as land, house or apartment) during their lifetime among family members, who for this purpose mean parent, spouse, son, daughter (married, unmarried, widowed or divorcee), son's wife, grandson, grand daughter, brother or sister (married, unmarried, widowed or divorcee).

“This is a good decision. It will come in handy to people of all economic classes, both in urban and in rural areas,” Sucharita Basu, managing partner of law firm Aquilaw, said.

For instance, a property valued at Rs 2 crore by circle rate would have attracted a stamp duty of Rs 1 lakh. Under the new proposition, the duty would be only Rs 1,000.

A gift deed is one of the popular choices in succession planning, while the other one is drawing up a will.

In the case of a will, which becomes effective after the death of the testator, the responsibility falls on the executor to give effect to the will. The transfer of property to any person (family or outside) by a will does not attract any stamp duty, observed N. G. Khaitan, senior partner of Khaitan & Co.

However, a will can be subjected to legal challenge and they sometimes land up in court if there are disputes among beneficiaries or family members. “Fearing legal complications, many people are advised to transfer property by gift deeds during their lifetime,” said a legal expert.

Sushil Mohta, president of Credai West Bengal, observed many people also create trusts as part of succession planning where the intended recipient of the property is made the beneficiary. “However, gift deeds are a less complicated way of inheritance planning. Given that property prices are only going higher, the government decision will help many save money on stamp duty,” he explained.

The special rate of 0.5 per cent of the circle rate, which is prevalent now, is only applicable to family members. Gift deeds to non-family members attract regular stamp duty, which stands at 6 per cent and 5 per cent for properties above Rs 1 crore in urban and rural areas, respectively, and 5 per cent and 4 per cent for properties below Rs 1 crore in urban and rural areas, respectively.