1 Answer
Dear Client,
Excellent question! Yes, you should definitely prepare a gift deed to protect yourself from future income tax scrutiny. Here's comprehensive guidance:
1. DO YOU NEED A GIFT DEED?
YES, STRONGLY RECOMMENDED for several reasons:
a) Tax Compliance:
- Under Section 56(2)(x) of Income Tax Act, cash gifts above ₹50,000 from non-relatives are taxable
- But gifts from mother are EXEMPT (mother is a specified relative)
- However, Income Tax Department may question large deposits (₹1 crore)
- Gift deed provides documented proof of source
b) Future Protection:
- In case of IT scrutiny/assessment
- Proves money is not your undisclosed income
- Avoids penalties and interest
- Protects against money laundering inquiries
c) Legal Evidence:
- Documentary proof of gift transaction
- Prevents future family disputes
- Creates clear paper trail
2. TAX IMPLICATIONS:
Good News: NO TAX PAYABLE!
Under Section 56(2)(x) of IT Act read with Explanation (e):
- Gifts from mother are completely TAX-FREE
- No matter the amount (₹1 crore or ₹10 crore)
- Mother falls under "specified relatives" list
- You don't need to show it as income in ITR
However:
- You MUST report it in your ITR in Schedule EI (Exempt Income)
- This shows transparency to IT Department
- Prevents future questions
3. WHERE TO PREPARE GIFT DEED:
You have 2 options:
Option A: Karnataka (Bangalore) - RECOMMENDED
- Since you are the donee (recipient) and resident of Bangalore
- Easier for you to execute and get registered
- Your mother can sign before a Notary in Mohali
- Send notarized deed to you in Bangalore
- You get it registered in Bangalore Sub-Registrar Office
Option B: Punjab (Mohali)
- Where your mother (donor) resides
- She can execute and register it there
- But you'll need to travel or give power of attorney
- Less convenient
BEST APPROACH:
- Prepare gift deed in Bangalore
- Your mother signs before a Notary Public in Mohali
- Get it notarized there
- Send original to you in Bangalore
- You register it at Bangalore Sub-Registrar Office
4. STAMP DUTY:
IMPORTANT: For MONETARY GIFTS (cash/bank transfer), stamp duty is MINIMAL!
In Karnataka:
- For gift of movable property (money): ₹100 stamp duty
- Registration fees: ₹1,000 (approximately)
- Total cost: Around ₹1,100 only
Note: High stamp duty (3-6% of value) applies only for IMMOVABLE property (land/house) gifts
Since yours is a cash gift via net banking, stamp duty is just ₹100!
5. DOCUMENTS REQUIRED:
For Gift Deed Preparation:
- Your mother's PAN card
- Your PAN card
- Your mother's Aadhaar/ID proof
- Your Aadhaar/ID proof
- Bank statements showing transfers
- Your mother's bank statements (proving source)
For Registration:
- Original gift deed (on ₹100 stamp paper)
- Two witnesses (with ID proofs)
- Photos of donor (mother) and donee (you)
6. STEP-BY-STEP PROCESS:
Step 1: Draft Gift Deed
- Hire a lawyer in Bangalore (cost: ₹2,000-₹5,000)
- Or use online legal services
- Draft should mention:
* Donor: Your mother's details
* Donee: Your details
* Amount: ₹1,00,00,000 (one crore)
* Period: [Start date] to [End date]
* Mode: Bank transfer/NEFT/RTGS
* Bank details and transaction references
* Declaration of free will and love & affection
Step 2: Execution by Mother (in Mohali)
- Print deed on ₹100 stamp paper (buy in Punjab)
- Your mother signs before Notary Public in Mohali
- Two witnesses sign
- Get it notarized with seal
Step 3: Send to Bangalore
- Courier original notarized deed to you
- Keep notarized copy for mother's records
Step 4: Registration in Bangalore
- Visit Sub-Registrar Office near your residence
- Carry all documents
- You sign before Sub-Registrar
- Pay registration fees (₹1,000 approx)
- Get registered deed (takes 1-2 weeks)
Alternative: You can also do this through e-registration if Karnataka offers it for gift deeds.
7. SAMPLE GIFT DEED FORMAT:
```
GIFT DEED
This Gift Deed is executed on [Date] at Bangalore
BETWEEN:
Mrs. [Mother's Full Name], aged [age] years, daughter of [grandfather's name], residing at [Full Address, Mohali, Punjab], PAN: [PAN Number], hereinafter referred to as the "DONOR"
AND
[Your Full Name], aged [age] years, son/daughter of [Mother's name] and [Father's name], residing at [Full Address, Bangalore], PAN: [PAN Number], hereinafter referred to as the "DONEE"
WHEREAS:
1. The Donor is the mother of the Donee.
2. Out of love, affection, and natural affection towards the Donee, the Donor has gifted a sum of Rs. 1,00,00,000/- (Rupees One Crore Only) to the Donee.
3. The said gift amount was transferred through bank transfer/NEFT/RTGS from the Donor's bank account to the Donee's bank account during the period from [Start Date] to [End Date].
DETAILS OF TRANSFER:
- Donor's Bank: [Bank Name, Account Number]
- Donee's Bank: [Bank Name, Account Number]
- Transfer Dates and Amounts:
* Date: [Date] - Amount: Rs. [Amount]
* Date: [Date] - Amount: Rs. [Amount]
[List all major transfers]
- Total Amount: Rs. 1,00,00,000/-
NOW THIS DEED WITNESSETH AS FOLLOWS:
1. The Donor hereby confirms that she has gifted the said sum of Rs. 1,00,00,000/- to the Donee out of natural love and affection.
2. The Donor declares that she has transferred the said amount from her own bank account to the Donee's bank account through legitimate banking channels.
3. The Donor confirms that the gifted amount is from her legitimate sources of income and there are no claims, encumbrances, or liabilities attached to the same.
4. The Donee hereby accepts the said gift of Rs. 1,00,00,000/- from the Donor.
5. This gift is absolute, unconditional, and irrevocable.
6. The Donor warrants that she has made this gift out of her free will without any force, fraud, or undue influence.
IN WITNESS WHEREOF the parties have signed this Gift Deed on the date mentioned above in the presence of the following witnesses:
SIGNATURES:
Donor: _____________
[Mother's Name]
Donee: _____________
[Your Name]
WITNESS 1:
Name: _____________
Address: ___________
Signature: _________
WITNESS 2:
Name: _____________
Address: ___________
Signature: _________
NOTARIZATION/REGISTRATION:
[Space for notary seal or sub-registrar stamp]
```
8. INCOME TAX RETURN FILING:
In your ITR (Income Tax Return):
- Report ₹1 crore in Schedule EI (Exempt Income)
- Mention source: "Gift from mother"
- Attach copy of gift deed
- Keep bank statements ready
This shows transparency and prevents future scrutiny.
9. MOTHER'S TAX IMPLICATIONS:
Your mother needs to consider:
- If she gifts more than ₹50,000 in cash in a year, she should report it
- But giving gift to children is not taxable for her
- She should maintain proper records
- If IT asks her source, she should have her income records ready
10. COSTS SUMMARY:
- Stamp paper: ₹100
- Lawyer fees for drafting: ₹2,000-₹5,000
- Notarization in Mohali: ₹500-₹1,000
- Registration in Bangalore: ₹1,000
- Courier: ₹200
- Total: ₹3,800 to ₹7,300 approximately
11. TIMELINE:
- Drafting: 1-2 days
- Notarization in Mohali: 1 day
- Courier: 2-3 days
- Registration in Bangalore: 1 day (appointment + execution)
- Total: 5-7 days
12. RETROACTIVE GIFT DEED:
Since you've already received the money (over 1.5 years), you can:
- Still execute gift deed now (retroactively)
- Mention actual dates of transfers
- This is perfectly legal and acceptable
- IT Department accepts retroactive gift deeds if properly documented
13. ADDITIONAL PROTECTION:
Also maintain:
- Complete bank statements showing all transfers
- Your mother's bank statements (proving source)
- Your mother's ITRs for relevant years
- Your ITRs showing exempt income
- This creates comprehensive documentation trail
RECOMMENDATION:
DEFINITELY prepare and register the gift deed immediately. For ₹1 crore, spending ₹5,000-7,000 on proper documentation is extremely wise and will save you from potential tax troubles worth lakhs in future!
IMMEDIATE ACTION:
1. Contact a lawyer in Bangalore this week
2. Draft gift deed
3. Send to mother for notarization
4. Register in Bangalore
5. Report in your next ITR
DISCLAIMER: This is general legal and tax advice based on information provided and does not constitute an attorney-client relationship or professional tax consultation. For specific guidance on your tax situation, please consult with a Chartered Accountant and a lawyer who can review your complete financial documents.
You're on the right track by asking this question - proper documentation now will give you complete peace of mind!