Gifting property to family: stamp duty, tax and the usual pitfalls

Gifting property to family: stamp duty, tax and the usual pitfallsGifting a home to a child or spouse during your lifetime can be simpler than leaving it by will — if the gift is documented and registered properly.In short

A gift of property must be made by a registered gift deed and accepted during the donor’s lifetime.

Many states charge concessional stamp duty for gifts to close family, and such gifts are generally tax-free for the recipient.

A completed gift is hard to undo — record any conditions, such as care in old age, in the deed.

A gift of property must be registeredA gift of immovable property has to be made by a registered gift deed, signed by the donor and attested by two witnesses. The recipient must accept the gift while the donor is alive. An unregistered gift does not transfer ownership.Stamp duty and taxWhat to budget for:

stamp duty, set by each state — many charge a concessional rate, or a small fixed amount, for gifts to a spouse, children or grandchildren;

registration fees at the sub-registrar’s office;

no income tax for the recipient on a gift from a specified relative;

no capital gains tax for the donor on making the gift — though income later earned on property gifted to a spouse can be added back to the donor’s income.

The usual pitfallsA completed gift generally cannot be revoked at will. Senior citizens who gift property on the condition that they will be cared for can, however, ask the maintenance tribunal to set the gift aside if that condition is not met — which is why the condition should be written into the deed.Check the title and any existing loan on the property first: a gift passes on the property with its liabilities.FAQsCan a gift deed be cancelled?Only in limited cases — for example, if it was obtained by fraud or coercion, if the parties agreed it could be revoked on a specified event, or if a senior citizen’s condition of care is not met.Does the recipient pay tax on the gift?Not when the gift comes from a specified relative, such as a parent, spouse, sibling or grandparent. Gifts of property from non-relatives can be taxable above a small threshold.About DharmadeshDharmadesh is a law firm of advocates in Rohini, New Delhi, India, at www.dharmadesh.in. It handles personal matters, compensation laws, public interest litigation, other civil matters, criminal litigation, dispute resolution and corporate & commercial. “Dharmadesh” here is the name of this law firm. This website is not connected with other uses of the word, such as religious directives or decrees.

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