The Transfer of Property Act of 1882 defines a gift as a voluntary transfer of ownership without any consideration from the transferor. Section 122 states that there are no conditions, and if the transferor is willing to give up his property, including cash, without receiving anything in return, the transfer is said to be unconditional. Section 56 of the Income Tax Act also talks about the taxation of gifts that are received without consideration or with inadequate consideration.
Taxation of Gift from father to daughter
The following are the situations in which gifts are taxed: Gifts that are taxed in the recipient’s hands under the heading “Income from Other Sources.”
1. Monetary gift from father to daughter: Any amount of money received without consideration by the daughter and the aggregate value of such money received throughout the year exceeds Rs 50000 will be taxed in the hands of the father
2. Gift from father to daughter in Receipt of Immovable Property:
a) No Consideration: If the value of the such property exceeds Rs 50,000, the father will be taxed. It will be taxed under the category of “Other Income.”
b) Inadequate Consideration: If the consideration is less than the stamp duty value of the property and the difference is greater than the higher of Rs 50,000 or 10% of the consideration, then the father will be taxed.
Gift From Father to daughter under Income Tax Act,1961
Section 2(41) of the Income Tax Act, 1961, gives the following definition of the term “relative”: “Relative,” in relation to an individual, means the husband, wife, brother, sister, or any lineal ascendant or descendant of the individual.
Gifts from the father to daughter are tax-free, regardless of the amount. A parent would be considered a “relative,”; thus, a gift from a father to a daughter will not be taxed in his hands as income. Without having any financial consequences for the kids, parents are free to give their kids any amount of money from their taxable income. Parents and kids fall under the defined category of “relatives,” who are excluded from paying income tax under the Income Tax Act.
- Husband/Wife, Son/Daughter (including stepchild and adopted child),
2) Father/Mother (including stepfather/mother),
3) Daughter-in-law/Son-in-law, Brother-in-law (and his wife),
4) Sister-in-law (and her husband) are tax-exempt.
It would be in the daughter’s interest to get written confirmation there was a transfer of gift from father to daughter. Later, if the income tax officer wants, he can ask you to prove the identity and capacity of the donor to make the gift to her. She will need to prove that it was a gift from father to daughter.
Under Section 56, individuals are exempt from Income tax for gifts received on certain occasions, such as marriage. A gift from father to daughter for her marriage will be an exception. This is applicable only when the gift is in the name of the donee, who is either the bride or the groom; it would be taxable otherwise.
A gift deed is a legal document that is used when one person wishes to transfer money or property to another. A gift from father to daughter can be made during his lifetime. The gift can be property or anything else. For this purpose, since the immovable property is being transferred, he will have to execute a gift deed in your favor.
Essentials of a Gift from father to daughter
1) While drafting a deed of gift from father to daughter, the person must keep in mind that a gift is only considered valid if it is made voluntarily, without consideration.
2) There must be an offer by the donor, and the offer must be accepted by the donee. And the donee accepts the gift, according to Section 122 of the Transfer of Property Act, 1882.
3) The gift from father to daughter must be made willingly by the father, without any monetary transaction, and accepted by you. The deed must be signed by your father and witnessed by two witnesses.
Registration of Gift Deed
Section 17 of the Registration Act of 1908 lays down the documents that must be registered. As per Section 17(1)(a) of the Registration Act, a gift deed must be compulsorily registered, and charges have to be paid. Each state government determines a different value for stamp paper. A deed drafted for a gift from father to daughter must be written on the stamp paper after paying the applicable charges, after which the gift deed should be registered at the registrar’s or sub-registrar’s office.
Advantages of a Gift Deed
1) It allows the donor to freely transfer ownership of the movable or immovable property to the donee. In the case of a gift from father to daughter, this can be easily executed.
2) It allows the property owner to donate the property to anybody and removes any future inheritance or succession problems. A gift deed, unlike a will, transfers property quickly and does not require a court appearance to be performed.
3) A movable or immovable property, or an existing transferable property, can be donated via a deed. Having a registered deed will assist you in preventing any further disputes.
4) For the most part, deed transfers are generally Income tax-free for both the sender and the donee. Since a gift from father to daughter is tax-free, deed transfers are simpler.
Contents of the Gift Deed
1) The place and date on which the deed is to be executed.
2) Relevant information on the gift deed regarding the donor and the donee, such as their names, address, relationships, date of birth, and signatures.
3) Provide complete information and details about the property for which you draft a gift deed.
4) Two witnesses to bear testimony of the deed and their respective signatures
5) Print the details on the stamp paper with applicable value depending upon each state
7) Getting the deed registered at the respective registrar or sub-registrar’s office.
The income tax levied on a gift from father to daughter is an important concept to be understood. The transfer of property by way of gift is a common process; however, it is important for the owner to comprehend the complexities of the property transfer and to follow the enabling terms relating to the legal system.
The deed can be drafted and executed properly with the help of legal professionals and proper online legal advice. With the right guidance and assistance from legal experts, this process is simplified.