What is the Stamp Duty and Tax on the Gift Deed of the Property?
Mar 24, 2020 Legal Guidance
Gifting is a method through which a person voluntarily transfers the rights of an asset to someone else. Even though gifting of a property does not involve and transaction of money, the property needs to be registered and the stamp duty for the same must be paid when accepting the gift.
What are the legal requirements for the gift deed?
According to the transfer Property Act, the transfer of the house property under the gift comes into effect only after the property is registered and the document pertaining to the same is signed by or on the behalf of the person gifting the property and should be attested by at least two witnesses. The registrar should make sure that the applicable stamp duty is affixed on the gift deed/ document when presented for the registration. The amount of stamp duty and registration charges applicable for the gifted property is same as the cost of the property at the time of gifting.
Some states provide special sale on stamp duty and registration charges if the property is gifted to a relative or a family member. Maharashtra has capped the stamp duty charges at Rs 200 for the gifting of the residential or agricultural land to one’s spouse, children, grandchildren or wife of a son who has died.
Income tax applicable to the gifted properties
According to the Income-tax laws, the value of the gifts received by the person during a year is fully exempt, as long as the total value of the gifts received in a year is limited to Rs 50,000. If the value of the gifts exceeds Rs 50,000 then the gifts become taxable without any threshold exemption. The Income Tax laws give special treatment to the gifts exchanged between the relatives. The gift (moveable or immoveable) exchange between two close relatives is fully exempted from tax bracket without any upper limit. Close relatives include parents, spouse, siblings, siblings of the spouse, lineal ascendants and descendants of the person or their siblings.
If the property is received as a gift from a close relative, then the first instance of the tax will arise when the said property is sold to an outsider. The cost, for the purpose of income tax, should be taken as the cost that was paid for the property by any of the previous owners. The profit is treated as either long term or short term, depending on when the property is sold.
If the property is sold within 36 months, then the profit acquired in the months is added to your regular income and taxed accordingly. If the property is sold after 36 months then the seller gets the benefit of indexation of the property as well as the option to claim exemption from payment of 20% long term capital gains by investing in a residential house or capital bonds of Rural Electrification Corporation or National Highway Authority of India.
Things to know:
What are the legal requirements for the gift deed?
According to the transfer Property Act, the transfer of the house property under the gift comes into effect only after the property is registered and the document pertaining to the same is signed by or on the behalf of the person gifting the property and should be attested by at least two witnesses. The registrar should make sure that the applicable stamp duty is affixed on the gift deed/ document when presented for the registration. The amount of stamp duty and registration charges applicable for the gifted property is same as the cost of the property at the time of gifting.
Some states provide special sale on stamp duty and registration charges if the property is gifted to a relative or a family member. Maharashtra has capped the stamp duty charges at Rs 200 for the gifting of the residential or agricultural land to one’s spouse, children, grandchildren or wife of a son who has died.
Income tax applicable to the gifted properties
According to the Income-tax laws, the value of the gifts received by the person during a year is fully exempt, as long as the total value of the gifts received in a year is limited to Rs 50,000. If the value of the gifts exceeds Rs 50,000 then the gifts become taxable without any threshold exemption. The Income Tax laws give special treatment to the gifts exchanged between the relatives. The gift (moveable or immoveable) exchange between two close relatives is fully exempted from tax bracket without any upper limit. Close relatives include parents, spouse, siblings, siblings of the spouse, lineal ascendants and descendants of the person or their siblings.
If the property is received as a gift from a close relative, then the first instance of the tax will arise when the said property is sold to an outsider. The cost, for the purpose of income tax, should be taken as the cost that was paid for the property by any of the previous owners. The profit is treated as either long term or short term, depending on when the property is sold.
If the property is sold within 36 months, then the profit acquired in the months is added to your regular income and taxed accordingly. If the property is sold after 36 months then the seller gets the benefit of indexation of the property as well as the option to claim exemption from payment of 20% long term capital gains by investing in a residential house or capital bonds of Rural Electrification Corporation or National Highway Authority of India.
Things to know:
- What is a gift deed? Gift deed is the transfer of the property from one person to another as a means of gift. A gift deed is valid only if it is done without any consideration of anything in return by the family member or friend. It is mandatory to register the gift deed, according to Section 17 of the Registration Act, 1908.
- How can one make the gift deed for the property? According to the Transfer of Property Act, the transfer of a house or property under a gift which needs to be effected by the registered instrument or the document signed by or on behalf of the person gifting the property in presence of two witnesses.
- Can a gift deed be challenged? Yes, the gift deed can be challenged in the court based on the legality subject to the law of limitation and proof of its legality.
- Who can give the gift deed? The person who id the owner of the property can gift the said property to the relative or a third person. The gift, however, will be considered valid only if it is done without any consideration for anything in return.
Looking for property portal?
Related Articles
-
-
-
Some Unknown Facts About Cibil Report
Oct 10, 2017 -
All about ‘Property Tax’
Sep 19, 2016
See comments (0)
Write a comment
