Tax on Gifted Property in India

Inheritance Tax on Gifted Property

As an NRI, you may have several doubts regarding the rules of tax on gifted property in India. Many may be worried or concerned about the tax implications on gifted property in India. Further, many people, whether they are NRIs or not, are unsure about the tax rate on gifted property. In the case that you have inherited property, you may be unclear about the rules regarding inheritance tax on gifted property. However, we are here to provide you with all the information you will need in order to make this process of paying gift tax much easier on your mind as well as your pocket.

What Are The Tax Rates On Gifted Property In India?

You should know that, as of 2017, there is no gift tax in India. The Gift Tax Act of 1958 has been repealed in India, with effect from the 1st October 1998. However, it is not as simple as all that. If the value of the item gifted by you happens to exceed a certain limit, then based on certain guidelines followed by the Government of India, there could be a small amount levied on your gift.

The good news is that there is absolutely no gift tax when the gift is being made to a relative of yours irrespective of the actual value of the gift. For the gift to be tax-free in India, the person to whom you make the gift should be your:

  • Spouse
  • Brother or sister
  • Brother or sister of either spouse
  • Parents
  • Brother or sister of either parent
  • Any hereditary heir of either spouse.

When Can Gifted Property Be Taxed In India?

Gifts exceeding the value of INR 50,000, when it is made to someone who is not your relative, as defined above, is liable to be taxed by the Indian Government. If we consider something like property, then the value will be calculated given the fair market value at the time of gifting.

Gift Of Money In Order To Avoid Black Money: How To Avoid It?

You should be wary if any Indian resident asks you to give them a cheque as a gift in exchange for cash. This is one of the easiest ways to convert black money into white money. Even though this may seem like a harmless request to you at the time, this is illegal and you should avoid such transactions to avoid any legal complications in the future.

Wealth Tax On Gifted Property In India

In the case that you have gifted something of large value, like property or land, you will not have to pay a gift tax if you have gifted the asset to one of your relatives as defined above. While you may be exempted from the gift tax in this case, you will still have to pay the applicable wealth tax for the property.

Wealth tax is applicable if the individual’s net worth exceeds INR 30 lakhs. If this is applicable to you, then you will have to pay a wealth tax on the value of your gift. A person’s net worth is calculated by taking all your assets into account and deducting any loans taken to purchase them.

What Is The Gift Deed Format?

When you are making a valuable gift to anyone, it is highly recommended that you put it in writing using the Gift Deed. Even if you trust the person you are making the gift to, you should still put it in writing so that there are no legal complications of any sort in the future. A stamp duty of the specified amount will have to be paid for you to get the gift deed. The stamp duty will be different in different states. Some Indian states also offer a concession in stamp duties as well if you are making a gift to a family member as we have defined above. Your Gift Deed format should include:

  • Details of the giver or donor
  • Details of the receiver
  • Relationship of a receiver with the giver
  • Details of the property that is being gifted
  • Signatures of donor and receiver
  • Details of two witnesses in whose presence the deed was executed
  • Signatures of the witnesses

Now that you know that tax on gifted property has been abolished in India since 1998, you can rest easy. However, in the cases we have specified above, you still may be liable to pay a tax to the Indian government. Hence, you now have a clear understanding of the tax implications on gifted property in India. Further, you will also have a fair idea of the inheritance tax on gifted property as well as the tax rate on gifted property.