Gifting property to a relative is one of the various modes of transfer of property. A person can make a gift of both moveable and immoveable property.
An NRI can make a gift of cash, cheque, property to any relative in India. The gift transactions by NRIs are subject to FEMA rules and regulations.
In India, the gift of a property in blood relation is exempted from any gift tax. The relatives, who qualify for the exemption, are the ones who are defined as “relatives” under the Income Tax Act and FEMA.
The procedure of making a gift to a relative in India :
If the property is moveable, the gift transaction is complete once the property is delivered and accepted.
If the property is immovable, the donor transfers the ownership through a registered gift deed. However, a person can gift a moveable property also through a gift deed. There is a legal procedure that is followed for making a valid gift deed, and it involves the following steps:
Gift Deed Creation
It is a legal document that describes the transaction. The deed contains an unambiguous description of the property to be gifted. The property has to be tangible and existing property. A person cannot gift any future property. The donor must gift the property voluntarily. The transfer must be without any monetary consideration.
The deed must contain the details of the parties. There must be a mention of the fact that the donor and the donee are relatives. Any person who is capable of entering into a contract can be a donor. A minor cannot be a donor. Although a minor can be a donee and gift is accepted by his guardian on his behalf. The donor must be solvent. The donor can be an individual, HUF, or a juridical person like a company.
Acceptance of Gift
The donor must accept the gift. Both the donor and the donee must be living persons at the time of acceptance of the gift. In a transfer of property by gift, the liabilities also get transferred. Therefore, the gift must be accepted by the donee. For instance, if the donee takes possession of the property or starts collecting rent, such acts signify acceptance of the gift.
As per the Indian Registration Act, 1908, it is mandatory to register a gift deed. The parties require certain documents like PAN Card, title documents, ID proof, and Aadhaar card for registration. Some states may require a valuation certificate of the property and an encumbrance certificate.
The property valuers and property management firms are well versed with the process of valuation and market rates and provide legal services for the property’s valuation.
The deed is registered in the Office of Sub Registrar, where the immovable property is located. The parties submit the requisite documents. The donor and the donee sign the deed and it is attested by two witnesses.
Registration fees and the Stamp duty is paid as per applicable rates. Some states offer lower stamp duty if the property is gifted to a relative. The Registrar ensures that the parties have purchased the non-judicial stamp paper of accurate stamp duty.