Paypal Gift will only be free of charge if you have the actual funds sitting in your paypal account or is from your verified bank account, If the payment comes from your credit card then it will charge you but it does give you the option of paying the fees yourself or the recipient paying the fees.
A stated above if you do send by gift then you don't have any comeback if the transaction goes sour as you won't be covered under any of paypal supposed protection policys.