A gift deed transfers property now, while the owner is alive; it must be registered, and once accepted is hard to undo. A will transfers property only after the owner's death and can be changed any number of times before then. Registration of a will is optional.
Side by side
Factor
Gift deed
Will
Takes effect
Immediately, on registration and acceptance
On the death of the person making it
Can be changed
Only on narrow grounds
Yes, any time before death
Registration
Compulsory
Optional
Stamp duty
Set by the state; many give a concession for close family
None on the will itself
Acceptance
Must be accepted in the giver's lifetime
Not needed
Income tax for the receiver
Not taxed if from a relative as defined; otherwise may be taxed
Inheritance is not taxed as income
Can be challenged
On grounds such as fraud or undue influence
Often contested; probate may be needed in some places
When Gift deed matters
A gift deed suits an owner who wants the property to pass now, for example to a spouse or child, and accepts that it is hard to reverse.
When Will matters
A will suits an owner who wants to keep the property and control over it during their lifetime.
In more detail
A gift of immovable property must be made by a registered deed signed by the donor and attested by two witnesses (section 123 of the Transfer of Property Act). An unregistered gift deed does not transfer the property.
A will is governed by the Indian Succession Act, 1925 for most people. Probate is mandatory only in certain cases and places; a lawyer will advise whether it applies.
Neither route avoids mutation: after either, the new owner applies to have the municipal and revenue records changed.