Gifting a property is a kind gesture, and it is better to be aware of tax implications for gifting a property.
We had a case where Mr Bhushan, an NRI was gifted with land situated in India by his father, a resident Indian. He wanted to know:
- If a land in India can be gifted by his father who is a resident Indian
- The legal requirements to complete this gift transaction
- Tax implications
Our advice and guidance – Parties to a gift deed:
- Donor (giver)
- Donne (recipient)
Donor or Donne can be a Resident Indian or an NRI or a PIO.
Which property can be gifted: Any movable or immovable property like –
- Land /Building
- Shares and Securities
- Paintings, Drawings, Sculptures – Any other work of art
- Archaeological Collections
Agricultural Land, Farmhouse and Plantation Property in India cannot be gifted to NRI.
Legal Requirements for gift deed:
A gift is a voluntary transfer of movable or immovable property without consideration, by a donor to donne which is accepted by the donne during the lifetime of the donor. For a gift deed, we require:
- Donor – voluntary transfer
- Donne – acceptance of a gift
- Property to be gifted in existence
- Gift deed preparation
- Registration of gift deed
Both Donor and Donne are charged with the payment of tax as per Income Tax Act, 1961, under certain conditions mentioned as below. Tax is levied in the year in which the gift is received.
- Any rent received by the Donor on a gifted property is added to his income for tax purposes.
- For calculating Fair Market Value and Stamp Duty Value, it is better to take advice from a tax consultant
Exemptions from tax in case of Gift:
- If the aggregate value of the gift is less than Rs 50,000
- Gift received from the relatives (list of relatives provided in the Income Tax Act) – No tax irrespective of the value of the gift. In the case of Hindu Undivided family, all members are relatives.
- On Marriage of the recipient
- Gift received by will or inheritance
- From local authority
- From Charitable Trust/Find/Institution as per the provisions of the Act