Planning to gift a flat to your child? Read this to know all about gifting immovable property and more.
Gifts play an important role in developing loving, healthy relationships. And, as a parent, you’d certainly want to give the best of everything to your children. When they are younger, small gifts like toys, books, clothes, etc. are enough to make them happy. But once they grow up, you’d want to gift them something that they’d cherish their entire life.
A common gift that most parents in India give their adult kids is property. However, there are certain factors associated with making this transfer of immovable property. Not sure what they are? No issues! We’re here to help.
Let’s start with a better understanding of the term ‘gift’, shall we?
What is a ‘gift’?
Well, according to the IT (Income Tax) Act, a gift is the transfer of immovable or an existing movable property by a donor both voluntarily and without consideration, and either in cash or kind. It includes deemed gifts too.
Additional Reading: Save Tax Through Gifts. This is How It Works
Gift classifications and taxes
You did know that certain gifts are taxed in India, right? Well, if you didn’t, here’s a quick look at how gifts are taxed (gifts refer to movable assets, immovable assets or money):
- Gifts received with a monetary value up to Rs. 50,000 or lesser – Tax-free
- Gifts with monetary value more than Rs. 50,000 – The entire amount is taxable unless the gift qualifies for tax exemption
- Movable property without consideration – If the value of the property exceeds Rs. 50,000, it is taxable
- Movable property with consideration – If the fair market value of property minus consideration is greater than Rs. 50,000, then that value is taxable
- Immovable property without consideration – Taxable if stamp value is greater than Rs. 50,000
- Immovable property with inadequate consideration – If total stamp value of property minus consideration is greater than Rs. 50,000, then that value is taxable
- Immovable property with consideration – If the fair market value of the property minus consideration is greater than Rs. 50,000, then that value is taxable
Additional Reading: The Abolishing Of Gift Tax And What Happened Next!
What about gift tax exemptions?
- Gifts received by individual and spouse on the occasion of their marriage is completely exempt from tax, irrespective of the amount.
- Gifts (any amount) received from close relatives is completely tax-free. Relatives include spouse, parents, grandparents, great-grandparents, brothers, sisters, spouse’s brothers, spouse’s sisters, brothers and sisters of parents, lineal descendants, and spouse’s lineal descendants. Gifts received from relatives other than the ones mentioned are taxable.
- Gifts received under specific conditions such as the following:
- Legal nominees or heirs through a will or on succession
- Dependent of a deceased employee getting benefits such as bonuses, gratuity or such from the deceased’s employer
- Gifts received as appreciation or recognition of noble work from dignitaries or local authorities
- Rewards for exemplary performance in academics or extra-curricular received from universities, specified trusts or foundations, and educational institutions
- Recipients of cash or property transferred by an NRI parent, relative or child do not have to pay taxes on the same.
Gifting a flat to your child?
For starters, the transfer of immovable property such as a house or flat from a parent to his or her child is considered a gift. However, to validate the transfer, a gift deed needs to be registered and applicable stamp duty for the transfer needs to be paid. If these conditions are not met, the transfer of title to the donee will be considered null and void.
The best part, however, is that neither you nor your child will have to pay any taxes for this transfer of property. Just make sure that you get the gift deed registered without fail.
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