Tax on the gift from father to daughter

by  Adv. Rupa K.N  

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Tax on the gift from father to daughter

Introduction 

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. When it comes to tax on a gift from father to daughter, there are certain implications.

Taxation of Gifts

The following are the situations in which gifts are taxed: Gifts that are taxed in the recipient’s hands are listed under the heading “Income from Other Sources.”

1. Individuals/HUFs who get monetary gifts: Any amount of money received without consideration by a person/HUF and the aggregate value of such money received throughout the year exceeds Rs 50000 will be taxed in the hands of the individuals of the HUF. 

2. Individual or HUF Receipt of Immovable Property:

a) No Consideration: If the value of such property exceeds Rs 50,000, the donor 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.

Worried about Tax on Gift Deed? Talk to our lawyer

Gift From members of the Hindu Undivided Family

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 are tax-free, regardless of the amount. A parent would be considered a “relative,”; thus, if you get a gift from your father, it will not be taxed in your 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 gift money taxation under the Income Tax Act.

1)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 your interest to get written confirmation from your father that he has gifted you the amount. Later, if the income-tax officer wants, he can ask you to prove the identity and the capacity of the donor to make the gift to you. You will need to prove that it is a ‘Gift from your father.’

Avoid Tax implications later! Talk to lawyer now to sort this out

Exempt Tax

Under Section 56, individuals are exempt from tax for gifts received on certain occasions, such as marriage. This gift can be from anyone, including a relative. This exemption 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.

Income tax on gifts from father to daughter given on the occasion of their marriage is exempt and tax-free. Marriage is an occasion filled with gifts and presents for the couple, not merely a function. Each newlywed couple should be aware of the tax implications of these presents. This essay will teach you all you need to know about wedding presents and their taxation under Section 56.

Consult a Lawyer and get your Gift Deed Registered

Gift Deed

A gift deed is a legal document that is used when one person wishes to transfer money or property to another. If the father wishes to transfer the house to you during his lifetime, he can do so by way of a gift, and for this purpose, since the immovable property is being transferred, he will have to execute a gift deed in your favor.

Essentials:

1) While executing the deed, 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) It must be made willingly by your father, without any monetary transaction, and accepted by you. The deed must be signed by your father and witnessed by two witnesses.

Registration of 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. The gift deed must be written on 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.

2) It allows the property owner to donate the property to anybody and removes any future inheritance or succession problems. A registered deed is also proof on its own. 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 tax-free for both the sender and the donee.

Contents of the 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

6)Stamp rate

7) getting the deed registered at the respective registrar or sub-registrar’s office.

Conclusion

The taxability of gifts from HUF 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 legal advice. With the right guidance and assistance from legal experts, this process is simplified.

The process of drafting a deed of gift can be simplified. To know more about the procedure, get online legal advice.

Adv. Rupa K.N

Adv. Rupa K.N

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Advocate Rupa K.N, with over 24 years of independent practice, specialises in providing legal expertise, advice and guidance to a broad range of customers. Having been practising law independently for several years after doing her B.A. LLB from Bangalore University and PGDM from the National Institute of Personnel Management.

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