Gift refers to the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person to another. It is very common for people to receive gifts from friends and relatives. However, one needs to realise the ground realities in terms of regulations governing gifts.
An NRI or PIO may acquire residential or commercial property by way of gift from a person resident in India or an NRI or a PIO except agricultural land/plantation property/farmhouse. Nonresidents are not permitted to acquire immovable property by way of gift from a person resident in India.
An NRI can transfer agricultural land/farmhouse/plantation property in India as a gift to a person resident in India who is a citizen of India or to another NRI or PIO. A PIO can transfer any immovable property other than agricultural land, plantation property or a farmhouse in India as a gift to a person resident in India or an NRI or a PIO.
Tax implications:
It is important to note that gifting is accompanied by several tax implications.
1. Gifts received in cash: Gifts of money received by an individual of an amount exceeding Rs 50,000 in aggregate (subject to some exceptions) in one financial year would be taxable in the hands of the recipient.
2. Gift received in kind: Gift received in kind subject to some exceptions are taxable as follows:
Movable property:
Fair market value of movable property including shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art received without consideration and where the aggregate fair market value of the gift exceeds Rs 50,000. Difference between the aggregate fair market value and consideration is chargeable to tax if movable property (as described above) is received for a consideration that is less than the fair market value by an amount that exceeds Rs 50,000.
Immovable property:
Any immovable property received without consideration where the stamp duty value of the property exceeds Rs 50,000. The stamp duty value of the property will be chargeable to tax. Difference between stamp duty value and consideration is chargeable to tax if any immovable property received for a consideration less than the stamp duty value.
Certain gifts, however, are not taxable. These include:-
Gifts from relatives: Relatives of the recipient includes spouse, brother, sister, brother or sister of parents, brother or sister of spouse, any lineal ascendant or descendant, any lineal ascendant or descendant of spouse or the spouse of any individual; Gifts received on marriage. However, gifts received on other occasions such as birthdays, anniversaries, festivals and engagements will be chargeable to tax. Gift received under a Will or by way of inheritance, or in contemplation of death of the payer. Gift received on certain other events. Any gift received from any local authority, fund or foundation, university or other educational institution, or hospital or other medical institution or any trust/institution, as specified.
Income from gifts:
There is no capital gain if the property is transferred through gift. However, the income accruing from the gifted property will be taxed in the hands of the donor, in accordance with the Income tax Act. If the donee plans to sell the gifted property, he has to pay capital gains tax. For this, the cost of acquisition will be the cost at which the previous owner acquired the property.
Stamp duty and registration:
Gifts received are fairly prone to litigation. Hence, it is advisable that the gift is made through a registered document signed by the giver of the gift and attested by at least two witnesses. Gifts also attract stamp duty and registration charges as applicable to a sale deed. However, gifts to family members attract a relatively low rate of stamp duty. The stamp duty rates vary in different states.
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