The gift deed is an instrument by which the immovable or movable property owner can transfer the said property to another without any consideration. Before we get on how to prepare a gift deed for NRI, here is a quick introduction about gift deed and the NRI gift deed format updated in 2021.
The transmission of the ownership of property rights like sales, gifts, or mortgages can be initiated through the system of Alienation. Primarily, for any individual who has acquired a property in India through gifts, sales, inheritance, or relinquishment, then he must execute all mutations and revenue records in his name. But NRIs, most of the time do not have any reliable representatives to execute the transfer of property in India.
Issues regarding time constraint, travel, lack of legally relevant information entices obstacles like illegal possession/transfer/sale of property or land. In order to avoid such prevalent property frauds against NRIs, the potential buyer must instantly transfer in his name under the due process of law as provided under Indian law.
The entire process of transferring property title in India is quite cumbersome because most of the time, it becomes a court dispute. For example, a property transfer without a will can automatically make the title of a property questionable.
In India, the Transfer of Property Act, 1882 governs all property-related matters. Transfer of property through gift also entitles transferring of ownership to another person. This can be achieved by executing a gift deed. The gift deed is an instrument by which the immovable or movable property owner can transfer the said property to another without any consideration.
What are a donor and donee?
‘Donor’ is the person giving his/her property and ‘Donee’ is the person accepting the gift. The donor must voluntarily give the property to the donee without consideration. The gift will be legally valid only if the donee accepts it eternally.
For immovable property, the Gift Deed should be registered within the competent authorities mainly Registrar or Sub-Registrar. For movable property, it is imperative to register the Gift Deed. It is mandatory to get the Gift Deed registered and it should be executed towards the donee out of personal free will and choice, love and affection and without any consideration or expectation in return. This way the parties even though they are transferring the property won’t have to move to court. Hence, this mode of transferring is proved to be the most economical mode.
What is a Gift Deed?
A gift can be anything in relation to money like cash/cheque, property (movable or immovable) like house/ building, or any utility good like jewelry, antique objects, or any other assets which are transferred without having to make payment into the Capital Asset of the receiver. When an NRI wants to gift something to an Indian relative, then they can register a gift deed under section 17 of the Registration Act, 1908 especially if the property is immovable.
The gift deed and the process of gift-giving are legally inevitable. This is mainly because of the reason that the basic feature of a gift is to not seek any monetary compensation in return and is done without any consideration. So if an NRI transfers any property, movable or immovable under a gift deed, then they cannot transfer back the ownership of that property.
There are several clauses in the gift deed which are to be filled. These are:
- Donor and Donee: The Gift Deed defines the relationship between the donor and donee and also mentions the name and address to be filled
- Consideration: the donor should be transferring the gift out of love and affection and under personal choice. The same should be mentioned that the donee will receive the ownership of the gift without paying any compensation.
- Voluntary Transfer: The ownership of the gift is freely and voluntarily (free from any coercions, threat or fear) being transferred to the donee and cannot be transferred back in any circumstances. The deed should also include the fact that the donee has willfully accepted the gift.
- Ownership: The gift deed will transfer the ownership to the donee only if it is established that the said gift is absolutely being owned by the donor. Afterwards, this ownership will be transferred to the donee as soon as the delivery of the possession has been done. Gift: A detailed description of the gift should be mentioned in the Gift deed.
- Donee’s Rights: The rights of the donee should be established which involves sole ownership, peaceful enjoyment and possession of the property. It should also allow the donee to further sell or mortgage the property.
- Delivery: The intention of the gift deed should be clear, expressly or impliedly.
- Witness: Minimum 2 names and addresses of the witnesses alongwith their signature should be mentioned in the deed.
Revocation: To avoid any conflict in the future, the deed should have a revocation clause.
Who are the Parties to a Gift Deed?
There are 2 parties in a gift deed, i.e., donor and donee. The donor is the individual who gifts his property, and the donee is the person to whom the assets are gifted. The donor ought to have a sound mind and must be capable of entering into agreements at the time of making the gift.
A minor is incompetent in gifting property as he/she is incapable of entering into contracts. Though, the custodian of a minor can receive the gifts given to a minor on his/her behalf. The donor ought to make a gift deprived of any consideration, i.e. the donor should not accept anything from the donee for making the gift.
What are the properties that can be gifted by/to an NRI through a Gift Deed?
Both immovable and movable properties can be shown as gifts by the donor to the donee. Immovable property signifies land or any benefits arising out of land or anything attached to the earth but does not contain growing crops, standing timber or grass. The properties that are not measured immovable properties are considered as movable properties.
Though, the donor can gift only the properties that are prevailing at the time of registering the gift deed. He cannot gift the property which he supposes or will get in the future. The donor can gift only the properties of which he/she is the legal owner. The donor must be possessing the property of the gift at the period of making the gift.
How to prepare a gift deed for NRI?
In Section 123 of the Transfer of Property Act, 1882, the gift of immovable property is valid when gifted over a registered gift deed signed by the donor and the donee and attested by 2 witnesses. The gift of movable property is valid when gifted underneath a registered gift deed or by imparting delivery of the property to the donee.
For registration, the following process should be kept in mind:
- The gift deed covering all the clauses must be enlisted on stamp paper.
- The donor and donee should sign on all sheets of the gift deed and must be attested by a minimum 2 witnesses. The donee must take the gift in the lifetime of the donor and when the donor is of sound mind for it to be lawful.
NRI GIFT DEED FORMAT 2021
KNOW ALL MEN BY THESE PRESENTS that I, _____________ S/o Sh.___________ r/o _______________, transfers voluntarily, the property bearing no.___________ situated at _______________ (more particularly described in the schedule annexed hereto), the estimated value of which is Rs._____________ (Rupees_____________ only) to my daughter Smt.____________ w/o of Sh._________________ (hereinafter referred to as “the donee”) To Hold the same to the donee absolutely forever. I further declare that the said gift has been made by me out of my natural love and affection for the donee and the same has been accepted by the donee.
IN WITNESS WHEREOF, I have executed this deed this ________ day of __________.
I, Smt. ______________, the donee hereby accept the gift of the said property.
The price of the stamp paper on which the gift deed is completed varies from state to state. The gift deed executed on the stamp paper must be registered at the Registrar or Sub-Registrar’s office under whose jurisdiction the property to be gifted is located. If it is movable, the jurisdiction of the Registrar or Sub-Registrar’s office is the place where the donor is located.
Tax Implications of Gift Deed
Gifts are taxed in Section 56(2)(x) of the Income Tax Act, 1961. Under Section 56(2)(x)(a), when any person obtains a sum of money surpassing Rs.50,000 without consideration as a gift, then the entire gift amount will be taxed from the donee under ‘Income from other sources.
Under Section 56(2)(x)(b), when a person obtains an immovable property without consideration as a gift, and the stamp duty value of the gift deed surpasses Rs.50,000, then the stamp duty value of the property is taxable from the donee.
But, if the property or total is received from any of the following persons, then the taxation on the gift is relieved, and the donee won’t be taxed:
- If the gift is accepted from relatives, or
- If it is accepted on the occasion of the marriage of the individual, or
- If it is obtained under a will or by way of inheritance, or
- If it is collected in contemplation of the death of the donor, or
- If it is taken from a local authority, or
- If it is collected from any fund or other educational/medical institution, or
- If it is collected from any trust or institution, or
- If it is obtained by an individual from a trust corroborated or created solely to benefit the individual’s relative.
A Gift Deed completed by an NRI to an Indian Resident falling in any of the above-stated relation are also excused from tax and the donee can employ it for any of his personal purposes.
When is a Gift Void?
In a situation in which a gift contains an existing or future property, the gift in relation with the future property will be held void.
In a situation wherein the donee is more than one collectively, and one of them does not accept the gift, then it shall be void to that particular donee only and not all of them.
In a situation wherein the gift deed consists of two or more gift deeds, then the donee has the power and right to refuse one and accept the rest even if one has obligations and the other one is beneficial.
How can there be a Gift Deed in property matters in India made to an NRI?
A resident can send a gift to an NRI even if he is not a relative, especially because there is no tax on such gifts received by an NRI through gift deeds. Taking advantage of the same, many rich people in India used to transfer by way of gift a large amount of money to NRIs and avoid tax on their taxable income.
Now there is an adjustment in the rule. It says that the sum of money obtained by a person outside India from a resident, without any consideration is believed to accrue or arise in India. Therefore, the gift of money accepted by a person outside India by way of remittance from a resident would be taxable in India. Nonetheless, if the donor is a relative then the remittance is not taxable.
This amendment is only for the gift of money and not estates. Therefore, if the property located in India is transferred to an NRI through a gift deed, a tax claim is payable by NRI if the amount of such a gift is more than Rs 50,000.
FAQ’s on GIFT DEED for NRI
Who is eligible to gift property to an NRI?
Any valid proprietor of an existing property can gift property. A minor is incapable to gift a property through a guardian who can accept such a gift on his behalf.
Can the transfer of property be made orally?
A transfer of property may be completed without writing if it is not expressly essential by law. Gifts under the Islamic law may be completed orally, as it does not need registration.
What are the requirements for registering a gift deed?
The donor on the requisite stamp paper must sign the deed. It should be attested by minimum of two witnesses and the donee should bear the gift.
Can a gift be made to more than two persons and if one does not accept it, what occurs?
A gift to two or more persons (donees) can be made and if one of them does not take it, it is void for that particular donee.
Can gifts once made be deferred or revoked?
The donor and donee may settle that on the happening of a specified event, which does not rely upon the will of the donor, a gift shall be deferred or revoked.
What happens if a person dies after completing a gift deed without it being formally accepted by the donee?
According to the Court, acceptance of a gift is mandated without which such a deed is believed void. Such acceptance must be completed during the lifetime of the donor while he is capable of making it.