Procedure to get tax exemption on gifts to spouse and mother

You can take gift from your Spouse & mother & it is tax free CAPITAL RECEIPTS & No need to claim it anywhere in the ITR . Just keep following documents ready-

1. Photocopy of cheque

2. Buy stamp paper of Rs. 10 in your name & prepare Gift deed

Regards

SK AGARWAL

ca.skagarwal@gmail.com

Taxability of gits from relatives and others , I have prepared FAQ on Gift, ,list of relatives from whom an individual can receive the gifts without any income tax liability and also giving below Performa of gift deed.

1.Frequently Asked Question on Gift deed

What is a gift deed?

A gift deed is an agreement used when a person wishes to gift his asset (property or money) to someone. It is the transfer of certain existing (not future) moveable or immoveable property made voluntarily and without any consideration from one person (called ‘donor’) to another (called ‘donee’).

Who can gift property?

Any valid owner of an existing property can gift property. A minor is incompetent to gift a property though a guardian can accept such a gift on his behalf.

WHAT is the law that governs gifts by one person to another?

Transfer of Property Act, 1882.

What is a Transfer of Property?

Transfer of Property is an act by which a living person conveys property in present or in future to one or more living persons.

What may be transferred?

Property of any kind may be transferred, movable or immovable.

Can there be an oral transfer?

A transfer of property may be made without writing, if it is not expressly required by law. Gifts under the Islamic law may be made orally, as it does not require registration.

What is a gift?

It is a transfer of existing movable or immovable property made voluntarily without consideration by one person to another.

What are the ingredients of gift?

Gift is made by one person called the donor to another called the donee. There should not be any consideration for making a gift. That is, the donor should not receive consideration of any kind while making a gift. The donee should accept the gift in the lifetime of donor.

How gift of an immovable property is made?

Under the Indian Registration Act, any transfer of any immovable property, if the value of the property is more than Rs 100, should be in writing and should be registered.

What are the formalities for registering a gift deed?

The donor on requisite stamp paper should sign the deed. It should be attested by at least two witnesses; the donee should accept the gift.

What is meant by attested?

Attestation of an instrument (document) means that witnesses who sign the instrument should have seen the donor signing the gift deed and they should sign as witnesses in the presence of the donor and in the presence of each other.

Does gift of movable property require registration?

Gift of movable property, may or may not be registered. But delivery of the property and acceptance of it are essential.

How to effect delivery of the property?

The same way as goods is delivered in sale of goods.

What is the effect of a gift comprising both existing and future property?

A gift comprising both existing and future property is void.

Can gift be made to several persons and if one does not accept it, what happens?

A gift to two or more persons (donees) and one of them does not accept it, it is void so far he is concerned.

Can gift once made be suspended or revoked?

The donor and donee may agree that on the happening of a specified event, which does not depend upon the will of the donor, a gift shall be suspended or revoked.

What is a gift deed?

A gift deed is an agreement used when a person wishes to gift his asset (property or money) to someone. It is the transfer of certain existing (not future) moveable or immoveable property made voluntarily and without any consideration from one person (called ‘donor’) to another (called ‘donee’).

Who can gift property?

Any valid owner of an existing property can gift property. A minor is incompetent to gift a property though a guardian can accept such a gift on his behalf.

Why should I require a gift deed ?

As per law, the title in a property cannot be delivered without a written instrument even when its value is small. Therefore, such deed is important to obtain and execute.

What is the procedure to use such a deed?

The draft of such a deed can be directly printed as per instruction kit provided and can be successfully executed by obtaining the signatures of the donor, donee and witnesses. The registration of a gift deed involves additional formalities that have to be taken care of (see below).

What are the essential elements of a Gift Deed?

As per section 22 of Transfer of Property Act, a gift deed has the following essential elements:

Transfer of Property

No consideration (as it is just a gift)

Acceptance by the done

Is acceptance by the donee mandatory?

Yes, the acceptance of the gift is mandatory..

What happens if a person dies after making a gift deed without it being formally accepted by the donee?

As per recent directives by the court, acceptance of a gift is mandated without which such a deed is deemed void. Such acceptance must be made during the lifetime of the donor while he is ‘capable’ of making it.

Is registration of a gift deed mandatory?

As per section 123 of the Transfer of Property Act, the transfer of a gift of immoveable property must be effected by a registered instrument signed by donor and attested by two witnesses. For moveable property such as a car, such a registration is not mandatory and transfer can be achieved by delivery

2. If the individual person receives Gift from following persons are exempt from tax

Father

Mother

Brother

Sister

Son

Daughter

Grand Son

Grand Daughter

Husband

Wife

Sister’s Husband

Brother’s Wife

Wife’s Brother

Wife’s Sister

Husband’s Brother

Husband’s Sister

Mother’s Brother

Mother’s Sister

Mother’s Sister Husband

Wife’s brother’s wife

Father’s Brother

Father’s Brother’s Wife

Father’s Sister’s Husband

Father’s Sister

Grand Father

Grand Mother

Great Grand Father

Great Grand Mother

Daughter’s Husband

Son’s Wife

Wife’s Father

Wife’s Mother

Husband’s Father

Husband’s Mother

Wife’s Grand Father

Husband’s Grand Mother

Husband’s Grand Father

Wife’s Grand Mother

Wife’s Great Grand Father

Husband’s Great Grand Mother

Husband’s Great Grand Father

Wife’s Great Grand Mother

Brother’s Wife

Mother’s Brother’s Wife

Husband’s Brother’s Wife

3. Deed of Gift(Draft Copy )

1. Date:

2. Place:

3. Parties:

3.1 _____________________, son of ________________, by faith Hindu, by Nationality Indian, by occupation – __________, residing at ____________________.

(Donor, includes successors-in-interest and assigns)

– AND –

3.2 _____________________, son of ________________, by faith Hindu, by Nationality Indian, by occupation – __________, residing at ____________________.

(Donee, includes successors-in-interest and assigns)

[Donor, Donee collectively Parties and individually Party.]

NOW THIS DEED OF GIFT WITNESSES AS FOLLOWS:

4. Subject Matter of Gift:

4.1 Subject Land: ALL THAT piece or parcel of land hereditaments and premises measuring 1 one Cottah 8 eight Chhittacks be the same a little more or less out of the total land of 3 three Cottahs situate and lying at and being Municipal Holding No. _________, Ward No. _____, within the limit of ________ Municipality and having Postal Address _____________ and more fully and particularly described in the Schedule below and demarcated in colour Red on the Plan attached hereto (Subject Land).

4.2 The Structure: One-storied brick built dwelling house, having built up area of ____________ Square feet, be the same a little more or less, standing on the Subject Land (The Structure), described in the Schedule below.

4.3 Other Rights: Easements and all other rights, liberties, privileges and benefits appurtenant to the Subject Land and The Structure and all equipments, installations, fittings, fixtures etc. in or about The Structure.

4.4 Subject Property: The subject matter of the Gift is 4.1, 4.2 and 4.3 above, which are collectively described in the Schedule below and demarcated in colour Red and shown as “Lot – A” on the Plan attached hereto (collectively Subject Property).

5. Background:

5.1 Description of the Title: Chain of title is to be described in detail here.

5.2 Sale to Donor: By a Deed of Sale dated _______, registered in the Office of the Sub-Registrar, ________, in Book No. I, Volume No. ____, Pages __ to ___, Being No. ______ for the year __________ (Said Deed), said _______ (Name of the previous owner) sold the aforesaid plot of land measuring about 5 Decimals or 3 three Cottahs more or less comprised in Dag No. ______ as aforesaid to the Donor hereto.

5.3 Ownership of the Donor: In the circumstances, the Donor hereto became the sole and absolute owner of ALL THAT piece or parcel of land measuring 3 (three) Cottahs be the same a little more or less including the common passage situate and lying at ____________________ and comprised in _____________.

5.4 Construction by the Donor: Subsequently, the Donor constructed a one-storied brick built dwelling house on his acquired property as aforesaid in accordance with the building plan duly sanctioned by the appropriate authority.

5.5 Said Property: Thus the Donor has become the sole and absolute owner in respect of the land and the structure as referred above (Said Property). The Subject Property is the part and portion of the Said Property.

6. Representations and Warranties of the Donor:

6.1 Absolute Ownership: The Donor is the absolute owner of the Subject Property.

6.2 Right, Power and Authority to Sell: The Donor has good right, full power, absolute authority and indefeasible title to gift and/or alienate the Subject Property.

6.3 Free from Encumbrances: The Subject Property is free from all claims, demands, encumbrances, mortgages, charges, liens, attachments, lis pendens, uses, debutters, trusts, prohibitions, Income Tax Attachment, Financial Institution Charges and liabilities whatsoever or howsoever made or suffered by the Donor or any person claiming through the Donor and the title of the Donor to the Subject Property is free, clear and marketable.

6.4 No Prejudicial Act by the Donor: The Donor has not at any time done or executed or knowingly suffered or been party or privy to any act, deed, matter or thing whereby the Subject Property or any part thereof can or may be impeached, encumbered or affected in title.

6.5 No Personal Guarantee: The Subject Property is not affected by or subject to any personal guarantee for securing any financial accommodation.

6.6 No Bar by Court Order: There is no order of Court or any other statutory authority prohibiting the Donor from transferring and/or alienating the Subject Property or any part thereof.

7. Basic Understanding: The Donee is the son of the Donor and the Donor bears natural love and affection for the Donee. The Donor has expressed his desire of gifting the Subject Property in favour of the Donee and the Donee has agreed to accept such gift.

8. Gift:

8.1 Hereby Made: The Donor doth hereby gift to the Donee, absolutely and forever, free from all encumbrances of any and every nature whatsoever, the Subject Property, described in the Schedule below, being:

8.1.1 Subject Land: ALL THAT piece or parcel of land hereditaments and premises measuring 1 one Cottah 8 eight Chhittacks be the same a little more or less, out of the total land of the Donor, i.e. 3 three Cottahs situate and lying at and being Municipal Holding No. __________, Ward No. __, within the limit of _________ Municipality and having Postal Address __________ and more fully and particularly described in the Schedule below and demarcated in colour Red on the Plan attached hereto.

8.1.2 The Structure: One-storied brick built dwelling house, having built up area of _________ Square feet, be the same a little more or less, standing on the Subject Land.

8.1.3 Other Rights: Easements and all other rights, liberties, privileges and benefits appurtenant to the Subject Land and The Structure and all equipments, installations, fittings, fixtures etc. in or about The Structure.

8.2 Consideration: Natural love and affection that the Donor bears for the Donee.

9. Terms of Gift:

9.1 Salient Terms: The gift of the Subject Property being effected by this Deed is:

9.1.1 Gift: A gift within the meaning of the Transfer of Property Act, 1882.

9.1.2 Absolute: Absolute, irreversible and forever.

9.1.3 Free from Encumbrances: Free from all encumbrances of any and every nature whatsoever including but not limited to lis pendens, attachments, liens, charges, mortgages, trusts, debutters, reversionary rights, residuary rights, claims and statutory prohibitions.

9.1.4 Other Rights: Together with Easements and all other rights, liberties, privileges and benefits appurtenant to the Subject Property.

10. Miscellaneous:

10.1 Delivery of Possession: Simultaneously with the execution of these presents khas, vacant and peaceful possession of the Subject Property is handed over by the Donor to the Donee (Possession Date).

10.2 Outgoings: All Municipal and other taxes, penalties, surcharge, outgoings, liabilities and levies on or relating to the Subject Property till the Possession Date, whether as yet demanded or not, shall be borne, paid and discharged by the Donor and thereafter that shall be borne, paid and discharged by the Donee.

10.3 Holding Possession: The Donor hereby covenant that the Donee shall and may, from time to time and at all times hereafter, peacefully and quietly enter into, hold, possess, use and enjoy the Subject Property and every part thereof and receive rents, issues and profits thereof and all other benefits, rights and properties hereby gifted or expressed or intended so to be unto and to the Donee, without any lawful eviction, hindrance, interruption, disturbance, claim or demand whatsoever from or by the Donor or any persons lawfully or equitably claiming any right or estate therein from under or in trust from the Donor.

10.4 Further Acts: The Donor hereby covenants that the Donor or any person claiming under him, shall and will from time to time and at all times hereafter, upon every request and at the cost of the Donee and/or successors-in-interest of the Donee, do and execute or cause to be done and executed all such acts, deeds and things for further or more perfectly assuring the title of the Donee to the Subject Property.

10.5 Production of Said Deed: As referred hereinbefore, the Said Deed and all other title documents in respect of the Said Property shall be lying with the custody of the Donor and unless prevented by fire or other unavoidable accidents from time to time and at all times hereinafter at like request and cost of the Donee, the Donor or his successors-in-interest will produce or cause to be produced the Said Deed and/or the said documents for reasonable requirement as may be required from time to time.

10.6 Assessment of Value for the purpose of Advalorem Stamp Duty: For the computation of stamp duty, the value of the Subject Property is assessed at Rs. ______/- (Rupees ________) only.

11. Interpretation:

11.1 Number: Words denoting the singular number include, where the context permits and requires, the plural number and vice-versa.

11.2 Headings: The headings in this Deed are inserted for convenience only and shall be ignored in construing the provisions of this Deed.

11.3 Definitions: Words and phrases have been defined in the Deed by bold print and by putting them within brackets. Where a word or phrase is defined, other parts of speech or grammatical forms of that word or phrase shall have corresponding meaning.

Schedule above referred to

(Subject Property)

[Subject Matter of Gift]

Detail of the Subject Property with boundary description …………

The Plot is shown on the Plan annexed hereto with the border Red and the Plan is treated as a part of this Deed.

12. Execution and Delivery:

12.1 In Witness Whereof the Donor has executed and delivered this Deed of Gift on the day, month and year mentioned above.

(DONOR)

I accept the Gift mentioned hereto with pleasure:

(DONEE)

Witnesses:

Signature: _________________________

Name:

Father’s/Husband’s

Name:

Address:

Signature: ________________________

Name:

Father’s/Husband’s

Name:

Address

———————–

If you are giving gift to your spouse, the income earned by your spouse on such gifted property will be clubbed in your income u/s 64 of the Income Tax Act. Though the income earned is clubbed in your income, if such income is re-invested and the income on such re-investment will not be clubbed in your hands and it will be assessable in the hands of your spouse only.

If you are transferring any income without transfer of property, then such income will also be clubbed in your hands u/s 60 of the Income Tax Act.

There is no gift tax on the gift in your hands and it will not be treated as income in the hands of your spouse and mother also u/s 56.

If you are giving gift of immovable property, you need to execute a gift deed and get it registered by paying stamp duty.

If you are giving gift of moveable property, there is no need for a formal gift deed and exchange of correspondence should be sufficient. In the case of securities like shares, units, bonds and debentures, you need to submit transfer forms to the issuer of such securities or demat agency and get them transferred. In the case of cash gifts, you may take an acknowledgement for the receipt of gift and in the case of payments through bank, account payee cheques may be given. As far as possible, avoid cash gift and use banking channel for gift for smooth assessment.

Explaining the step by step procedure perhaps means writing a detailed book. You can refer to standard books on conveyancing and deeds. Further, in any case, this has to be done by a lawyer or a CA, specifically to your needs.

Gifts to "relatives" as per ACT donot attract any tax and there is no restriction on amount as well. Gift to spouse may attract clubbing provisions in case income in generated out of gifts given to her. You may gift your mother. You may do so even in cash or cheque. It is recommended that you also prepare gift deeds.

Receiving the gift in the form of money in the hands of the receiver is not taxable if the gift is received from his relatives . Gift to your spouse not taxable . gift to the mother will also not taxable in the hands of the receiver . To justify the transaction as a gift in the hands of the receiver , it is better to have a gift deed and the gift is transferred through the bank or if in cash the entry should be identifiable . The recipient has to prove that it is the gift which she has received from a relative . Section 56 (2) (vii) is triggered here .

56(2)(vii) is applicable only when gifts are received by Individual and HUF.

Donor or Donee may be Resident or non Resident.

Gifts received from following are exempted:

i. From Relatives1

ii. On the marriage of individual,

iii. By will or inheritance

iv. In contemplation of Death of payer

v. From local authority

vi. From Charitable Trust registered u/s 12AA

vii. From Any Trust, Foundation etc referred u/s 10(23c).

1 Relatives means

– Spouse of Individual

– Brother & Sister of Individual

– Brother & Sister of Spouse of Individual

– Brother & Sister of either of the parents of Individual

– Any Lineal ascendants or descendants of the individual

-Any Lineal ascendants or descendants of the spouse of the individual.

In the present case the tax is exempted in the hands of your spouse and mother. You will not get any tax exemption on the amount you gift. You will gift the same from your taxable income.

Also you need to see that the you are you will not be attracting clubbing provisions because of such gift. for example: Income of husband which is shown to be the income of his wife is clubbed in the income of Husband and is taxable in the hands of the husband. Under the Income Tax Act a person has to pay taxes on his income. A person cannot transfer his income or an asset which is his one of source of his income to some other person or in other words we can say that a person cannot divert his income to any other person and says that it is not his income. If he do so the income shown to be earned by any other person is included in the assessee’s total income and the assessee has to pay tax on it.

There is no restriction on giving any gifts to direct relatives. It will not be treated as Income in the hands of the recipient.

However any amount paid to spouse with out any will attract clubbing provisions and the income accrued on the gifts received will be clubbed with the person who gifted the same.

Dear Sir/ Madam,

1. Yes you can give gifts to your Mother & Spouse which will not be taxable in there hands as they fall under the definition of relatives.

2. You cannot claim any tax exemption for the amount gifted by you to your mother or spouse.

3. Any income earned by your spouse by the amount gifted by you to him/her shall be considered as your income and clubbing provisions shall apply.

Regards,

CA Rohit R Sharma

www.raskassociates.com

There is no exemption to the donor for any gift made. Further, please note that gift to wife would involve provisions w.r.t to clubbing of income. Any gift can be given by writing a gift deed.

Regards

Ankit Jain

ankit@ajsh.in

There is no provision for claiming exemption under the Income Tax Act, on gifts made. On the other hand, any income earned by your wife from the amount gifted by you is to be clubbed with your income.

No sir you will not get any benefits of gift to you spouse or mother. And they also not be taxed for this gifts from you.