To address your inquiry and ensure clarity, here are the key legal points and steps to consider when your parents wish to transfer the properties to you through a gift deed, as well as addressing potential concerns regarding future claims from your estranged sibling:

1. Gift Deed for Property 1 (Urban Property):

Since you contributed 95% towards the purchase and construction of this property, it is important to note that you may already have an equitable interest in the property. While your father holds the legal title, a Gift Deed can be executed to formally transfer ownership to you. Here are the key points:

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  Gift Deed: The gift deed should clearly mention the details of the property, the fact that your father is gifting it to you, and that no monetary consideration is involved. It must also explicitly state that your father is transferring his ownership rights in the property to you.
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  Stamp Duty and Registration: The gift deed must be duly stamped as per the prevailing laws of your state, and it must be registered with the sub-registrar of the area where the property is located. Failing to do so can make the gift deed invalid.
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  Future Claims by Sibling: Since your estranged sibling may attempt to raise future claims, it is crucial that the gift deed clearly mentions that your sibling is not entitled to any share in the property. This can help mitigate any future litigation. However, as the property is still in your father's name, there is a possibility of a challenge under the Hindu Succession Act if your father passes away without a will.
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  Tax Implications: Gifted property can attract stamp duty and tax implications. As per the law, gifts received by a legal heir (parent to child) are not taxable under the Income Tax Act. However, if the property is sold or transferred later, capital gains tax may apply.

2. Gift Deed for Property 2 (Rural Property):

For Property 2, which was inherited by your father, the following considerations are important:

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  Gift Deed: Your father can execute a gift deed to transfer ownership to you, even though this property was inherited by him. The gift deed should detail the inherited status and the intention to transfer the property to you.
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  Possibility of Litigation: As the property was inherited by your father, your estranged sibling may claim rights over it under the Hindu Succession Act if your father passes away intestate (without a will). To avoid this, it is advisable for your father to execute a Will along with the gift deed, specifically stating his intention to transfer the property to you.
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  Sale and Gift of Proceeds: If your father wishes to sell the rural property and then gift you the proceeds, it can be done. However, selling the property and gifting the sale proceeds is not as straightforward as gifting the property itself. It involves additional tax considerations, such as capital gains tax on the sale of the property.

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    Capital Gains Tax: If the property is sold, your father will be liable to pay capital gains tax on the sale, depending on whether it is a long-term or short-term capital gain. Long-term capital gains (if the property was held for more than 2 years) are taxed at a reduced rate, while short-term capital gains are taxed at a higher rate.
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    Gift of Proceeds: Once the sale proceeds are gifted to you, it will be considered a gift of money, which is not taxable if it is from a parent to a child. However, you should ensure that the sale and the gift are both well-documented to avoid any complications.

3. Additional Legal Documents and Formalities:

To prevent any potential disputes in the future, the following steps are advisable:

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  Will: Given your estranged sibling, it would be prudent for your father to also create a Will stating his intentions regarding the division of his estate, particularly for Property 2. The Will can clearly state that you are the rightful owner of the property and prevent any future claims.
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  No Objection Certificate (NOC): If your estranged sibling decides to challenge the gift, having a clear NOC from them (if they are willing to sign) stating that they do not object to the transfer would be beneficial. This is not mandatory but can be used to prevent future claims.
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  Legal Notices and Documentation: Ensure all transactions and documents are properly documented and maintained. This includes notarizing the gift deed, registering the deed, and keeping copies of communication in case of future litigation.

Conclusion:

• For Property 1, a gift deed with appropriate legal formalities should suffice. However, ensure that the document explicitly addresses the fact that your sibling has no claim over the property, and consider having your father execute a will to clarify the division of assets upon his passing.
• For Property 2, a gift deed is also valid, but you may consider discussing whether selling and gifting the proceeds would be a better route. Selling would incur tax liabilities, and gifting the money instead of the property may have fewer complications.
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  Preventive Measures: To avoid future claims, your father should execute a Will and possibly obtain a No Objection Certificate from your sibling, if feasible. This will ensure that the gift deed is as watertight as possible.

If you require further assistance in drafting the gift deed or any legal documentation, please feel free to reach out for a consultation. I would be happy to help you navigate this process.