Stamp Duty Paid By Recipient On Property Received As Gift Will Make Gift Void

My mother owns a flat which she wants to gift to my sister. I understand that for a gift of property to be valid it is required to be registered like a sale deed. My query is, who is liable to pay the stamp duty (donor or donee), and whether any tax is to be paid by the donee after receiving the gift of property. If my sister wants to sell the property, what is the time period after which the gifted property can be sold? Will any capital gains tax be payable if another property is purchased within two years of selling this gifted property?  

Answer: First, a Gift Deed is required to be executed and registered in the office of the sub-registrar after making payment of the applicable stamp duty. The donor has to pay the stamp duty. If the donee pays the stamp duty, it can amount to consideration paid by the donee for the gift under the Transfer of Property Act, and the gift may be considered void.

Since mother is included in the definition of relative under Section 56(2), the gift received by your sister from her will not be treated as income. So, your sister will not have to pay any tax at the time of receiving the gift. There is no time limit after which the property received under a gift can be sold.  

So, your sister can sell the flat the very next day. For computing capital gains, the holding period will start from the date on which the original owner had paid for the property. This is particular in cases where asset is received as gift or inheritance.  

Your sister will not have to pay any tax if she invests the whole of the indexed long-term capital gains for purchase of a residential house within two years. In case lesser amount is invested, the exemption available will be computed proportionately.  

By when will a non-resident Indian (NRI) lose his/her NRI status after returning to India for work, even though he/she still has a valid visa to return? Can the NRI maintain an FCNR account once back in India? What are the other steps one has to take to avoid any unlawful act due to ignorance?  

Answer: Residential status of a person is not dependent on whether you hold a valid visa or not. Residential status is determined differently under Foreign Exchange Management Act, 1999 (FEMA) and Income-tax Act, 1961. For banking and investment purposes, which is governed under FEMA, the period of physical stay in India is generally not relevant. So, once you come to India for good, or with an intention to stay here for an uncertain period, or for taking up an employment, or for doing any business here in India, you immediately become a resident of India as soon as you land in India.  

Under income tax laws, your residential status will depend on your physical stay in India during the previous year. FCNR account may be continued for its tenure. In order to change the status of your existing bank accounts, you will need to inform all your bankers about the change in your residential status, immediately after returning India.

My father in law has given a gift by cheque to my daughter i.e., his granddaughter, from his account. Is that amount taxable?  

Answer: With the abolition of gift tax in India, now the recipient of such gift has to pay tax on gifts received. So, in case the aggregate of all gifts received during a financial year does not exceed Rs. 50,000, you do not have any tax liability, but once the aggregate value of all the gifts, whether in cash or in kind exceeds the threshold of Rs. 50,000, the entire amount becomes taxable in the hands of the recipient.  

Do note that gifts received from some specified relatives are outside the scope of this provisions, and thus are not to be treated as income. Since grandfather are covered within the definition of relative under Section 56(2), the gift received by your daughter from her grandfather will not be treated as income in her hands.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)