Know the Applicable Stamp Duty when Gifting an Asset

by

26 April 2019

Finance

Gifting an Asset

Ravi Krishnan was retiring from central government service. At this time, he decided to gift his three-bedroom flat in Navi Mumbai to his son Akaash. Krishnan is now 60 years old and would relocate to his native Bengaluru from Mumbai. Widower Krishnan has planned for his golden years well. He can easily manage with a pension of Rs.2.5 lakh a year in Bengaluru where he owns a house. While Krishnan was formally transferring the rights of his Mumbai flat to his son, he came to know that there are certain tax implications. He got down to assess what needs to be taken care of with regard to stamp duty gift deed. It turns out that the transfer of any immovable property, even from father to son, is considered as a gift as per the existing laws.

Stamp Duty on Gifts

Stamp duty is the tax levied on a property which is being sold or transferred. Stamp duty varies from state to state. It is in the range of 3–7% of the value of the property. The Transfer of Property Act mandates that the gifted property be registered as a ‘gift deed’. This should be duly signed by the person who is gifting it. It also needs to be signed in front of two witnesses.

A gift deed is a legal document that endorses the transfer of property from the donor to the receiver. There is no exchange of money in this case. The rate of stamp duty, however, is the same as in the regular sale of the property. However, some states are lenient in terms of stamp duty gift deed when it involves gifting of property between close relatives. You can make use of a free stamp duty calculator available on various real estate aggregator websites. Then you will know the exact rate applicable in the case of your gift deed property.

Components of a Gift Deed

  • Details of the property that is being given as a gift
  • Details of the donor such as name, father’s name, Aadhaar number, address, etc.
  • Details of the receiver such as name, father’s name, Aadhaar number, address, etc.
  • The date and place where the gift deed is being signed
  • Signature and details of two witnesses who were present when the gift deed was executed
  • Relationship between the donor and the receiver

Income Tax on Property Gifts

According to the Income Tax Act, 1961, you are not liable to pay tax on gifts received of up to Rs.50,000 in a year. What if the value of the gifts exceeds Rs.50,000? Then a gift tax is imposed on the receiver.

The Income Tax Department has taken into consideration that movable and immovable assets change hands between close relatives. So, it has exempted the receiver from paying any tax for a property received as a gift.

What is heartening is that there is no cap on the price of the property. However, the donor of such a gift has to be from a list prepared by the Income Tax Department. Which donors are exempt from taxes? That includes parents, spouse, siblings, siblings of the spouse, and direct ascendants and descendants of the donor and their spouse.

As a receiver of the property as a gift, you would only need to pay income tax when you decide to sell it. The Income Tax Department will treat the proceeds from the sale of the property as an income. You are liable to pay taxes on such an income. The rate of the taxes, however, will be decided on your period of holding. Short-term capital gains will apply to holdings below 36 months. If the holding period is beyond 36 months, you will have to pay long-term capital gains tax of 20%. But in this case, you will also be entitled to indexation benefits.

Conclusion

The gifting of immovable assets attracts taxes. One has to pay stamp duty and registration charges when the transfer of rights of a property takes place. Stamp duty varies from state to state but is essential in formalizing the gift you have received. For property received as a gift, you will not be required to pay any taxes unless you decide to sell it.

Read Also:

Content Rally wrapped around an online publication where you can publish your own intellectuals. It is a publishing platform designed to make great stories by content creators. This is your era, your place to be online. So come forward share your views, thoughts and ideas via Content Rally.

View all posts

Leave a Reply

Your email address will not be published. Required fields are marked *

Related

Finances

These Small Changes Will Change Your Finances For The Better

It’s easy to think only the big things matter when you’re looking at your finances. Your choice of mortgage and how much student debt you carry tie up your money in major ways, after all. Their effects can be so significant that many people assume they can’t make any positive changes to their finances until they can renegotiate their mortgage or pay off their debt. But these people are forgetting the lesson of the butterfly effect. Though the flapping of a butterfly’s wings may seem insignificant, the air it displaces can set off a chain reaction that causes a hurricane half-way around the world.If you’re ready to start improving your finances, don’t let the size fool you. You don’t have to wait until you can sort out the big things in your ledger. Even small financial choices can have a huge impact on your life. Take a look at this list of simple and small changes you can make to help bring order to your financial house. Shop for groceries like a pro : Your weekly trip down the aisles can lead to considerable savings if you’re organized. Maximize your savings at the supermarket by including these techniques every time you shop:Make a list: Research from the University of Pennsylvania shows shoppers who use lists can save 23 percent on their grocery bills. How? Those that stick to a list are less likely to make impulse purchases that bloat their bills.Shop generic: Recognizable brands often cost more money for no other reason than the label. Compare prices of generic items and make the switch. Use coupons: Coupons strike serious cash off certain items, especially when you use them on top of existing sales. Certain retailers allow you to stack them, so you can redeem more than one coupon on a single item and double, triple, or quadruple your savings.Price match: When half of your list is on sale at one grocery store, and the other half is on sale at another, you can cash in on both sets of promotions by shopping with a retailer that price matches competitor’s flyers. Though it will take some time at the till this strategy will save you the cost of driving around town to cash in on deals.Bank differently : How you deposit, withdraw, save, and invest can affect what’s sitting in your accounts. Slash unnecessary charges and drama from your life by adopting these new banking habits:Open a no-fee checking account: Most banks charge you monthly fees if you can’t keep a minimum balance. You can skip these charges by transferring your funds to a bank that doesn’t place these restrictions on your accounts. Stop using ATMs: Depending on where you live, you can spend $5 for the privilege of using an ATM. Let this post help you cut these charges out of your life by withdrawing from your bank directly.Search out online solutions: Traditional banks often have complex barriers that delay or prevent you from getting a loan you need to pay a bill, causing you to miss deadlines and pay more in interest. Direct cash advance lenders like MoneyKeyaren’t bound by the same red tape in most US states, so getting a payday loan from MoneyKey.com is simple by comparison. They’ve eliminated many of the complexities bogging down conventional assistance, so you can get a necessary cash advance quickly when time is of the essence. Shop with cash when you can: While mobile payments are more convenient, shopping with digital forms of cash can cause you to spend more. Try shopping with cash as much as possible, leaving credit cards and other e-payments for unavoidable purchases.Though few of these tips are impressive on their own, their true significance lies in their cumulative effects. Make enough little changes for long enough, and your financial habits can result in considerable savings.Read Also :Is Fixed Deposit The Right Place To Invest Post-Demonetization? 5 Smart Ways To Boost Your Credit Score Dealing With A Debt Relief Officer For A Better Assistance

READ MOREDetails
Sweat Equity

Investing In Sweat Equity: Tamara Loehr’s Winning Model

The traditional investment model is a flawed system, an old dinosaur that needs to evolve.It’s time we reevaluate the conventional wisdom surrounding investments, which is overly fixated on businesses that are already successful and tragically shortsighted when it comes to companies teetering on the edge of growth.In traditional investing, there’s an unspoken rule: the golden ticket to getting funding isn’t innovation or potential but a proven track record of making at least $10 million. This is a narrow-minded approach that does nothing more than stifle the very heart of our economy—small businesses.Introducing sweat equityEight-figure entrepreneur, growth mentor, and innovative investor Tamara Loehr (www.tamaraloehr.com) bring a breath of fresh air to the world of investing. She’s not your usual investor who waits for businesses to reach millions before swooping in.Instead, she actively seeks out businesses with potential and partners with them by investing her expertise and services to help them achieve growth and significant returns.She calls this sweat equity investment, a unique model that’s a game-changer for businesses. Tamara doesn’t merely provide financial backup; she rolls up her sleeves and brings a wealth of expertise, strategic vision, and creative solutions to the table.It’s a holistic approach that not only increases the likelihood of success for the businesses she invests in but also amplifies the potential returns for both the entrepreneur and herself.By focusing on small businesses and collaborating with them closely, Tamara is paving the way for a new era of investing that champions small businesses and fosters a more inclusive and dynamic business landscape.What is sweat equity?Sweat equity is a unique investment model where investors exchange their expertise, resources, and time for equity in a business. Tamara came up with this innovative approach to investing after seeing how traditional methods often left entrepreneurs struggling to repay loans or lose equity in their businesses.In this model, instead of investing cash, investors offer services to companies in exchange for a stake in their business. It's a win-win situation for both parties, as businesses receive the much-needed resources to grow, while investors gain a stake in a growing business.Why sweat equity worksSweat equity investment offers a unique and innovative approach to investing that can provide a range of benefits for both investors and entrepreneurs. If you're a creative investor looking to explore new investment opportunities, sweat equity investment is worth considering.Entrepreneurial access to expertiseOne of the key advantages of the sweat equity investment model is the access to expertise it provides to entrepreneurs. Founders have a strong vision and passion for their business but may lack skills or experience in areas such as finance, marketing, or operations. By partnering with a sweat equity investor with expertise in these areas, businesses can leverage this knowledge and experience so they can succeed faster.Sweat equity investors like Tamara are experienced business owners who have a track record of building and scaling successful companies. They are looking for new investment opportunities that align with their expertise and interests and are willing to offer their skills in exchange for equity. This type of partnership allows entrepreneurs to access the expertise they may not be able to afford to hire on their own.Entrepreneurs also gain access to an investor’s connections. These investors often have a vast network of contacts that can be beneficial to the business, including suppliers, customers, and other professionals in the industry.Sweat equity investors also have a vested interest in the success of their investments. They are not just passive investors but active partners who are invested in helping their partners achieve their goals. This means that they are likely to be more involved in the day-to-day operations of the business, offering guidance and advice as needed.Capital conservationInstead of pouring all their capital into hiring consultants or buying equipment, businesses exchange equity for the expertise and resources they need. This approach can be particularly useful for startups and small businesses that may have limited financial resources.When entrepreneurs team up with sweat equity investors, they’re essentially receiving support and guidance in exchange for equity. By doing so, they’re preserving capital and freeing up funds that can be reinvested in other areas of their business. This can be a game-changer, especially in the early stages of the business when cash flow is often a major challenge.The value of sweat equity extends far beyond the immediate financial gain. Entrepreneurs gain access to experts who are invested in the success of their business and who can help build and grow the company over time. By leveraging sweat equity, they’re setting themselves up for long-term success and sustainability.Risk mitigationWhen it comes to investing, risk is always a factor to consider. However, the risk can be mitigated with sweat equity investments. Investors and entrepreneurs share the risks of a sweat equity investment, thereby reducing the financial burden of starting, growing, and investing in a business.This shared-risk approach provides a safety net for entrepreneurs who may not have the financial resources to weather unexpected expenses or a downturn in the business.And because the investor is a partner and has a vested interest in the success of the business, they are more willing to provide support during difficult times.Overall, the risk-sharing associated with the sweat equity model can help entrepreneurs avoid bankruptcy or failure and increase their chances of success.Long-term commitmentOne of the most compelling reasons for exploring sweat equity investment is the long-term commitment it demands from both the entrepreneur and the investor.In a traditional investment model, investors are primarily focused on achieving financial returns and may not have a vested interest in the long-term success of the business.With sweat equity investment, both parties have a shared interest in the success of the business. The investor is contributing not just financial resources, but also expertise and guidance, which makes them invested in the company's future. This commitment from the investor can provide stability and security for the entrepreneur, who has a partner who is as committed to the business's success as they are.This shared commitment also means that both parties are willing to work together through challenges and changes, adapting and evolving as needed. In essence, sweat equity investment creates a partnership based on a mutual commitment to the business's long-term success.This long-term commitment is especially valuable for creative investors who are looking to invest in innovative, high-potential businesses. They have the opportunity to be part of something they believe in and help guide the company toward its full potential.Credibility boosterSweat equity investment is not just a way to conserve capital or mitigate risk, but also a chance to enhance an entrepreneur’s credibility. Customers and investors are more likely to do business with a company that has an experienced partner behind it.This type of partnership can lead to a reputation boost that ultimately results in more opportunities for growth and expansion.Aligned goalsWith sweat equity, the investor becomes a stakeholder in the business and has a personal interest in seeing it succeed. This shared interest ensures that both parties are working towards the same objectives and helps create a more collaborative and supportive relationship.When investors are only focused on financial returns, there can often be a misalignment of priorities with the entrepreneur. This misalignment can lead to conflict, mistrust, and a breakdown in the working relationship. With sweat equity, however, both parties have a vested interest in the success of the business. This shared interest can foster a strong sense of trust and cooperation between the two parties.Also, when the investor is invested in the long-term success of the business, they are more likely to stick around and provide ongoing support and guidance to the entrepreneur. This can help the entrepreneur navigate the challenges of growing a business and accelerate the path to success.Value-added mentorshipOne of the key benefits of the sweat equity investment model is the personalized mentorship that investors inevitably provide to entrepreneurs.For many entrepreneurs, starting a business can be overwhelming, and they may lack the necessary experience in certain areas of the business. This is where mentoring by a sweat equity investor becomes crucial. With their guidance and support, the entrepreneur can avoid costly mistakes and take the right steps to grow their business.The mentorship also provides entrepreneurs with an outside perspective and a fresh set of eyes. This can help identify areas of improvement and opportunities for growth that may have gone unnoticed. Through regular communication, investors can hold entrepreneurs accountable and help them stay on track with their goals.Ultimately, mentoring is a win-win situation for both parties. The entrepreneur gains valuable insights and guidance, while the investor can contribute to the growth and success of the business. With the right mentorship, entrepreneurs can take their businesses to the next level and achieve long-term success.TakeawaySweat equity is a game-changing investment model that provides a host of benefits to both investors and entrepreneurs.Tamara’s approach, which focuses on creating a long-term relationship between the investor and the entrepreneur, allows for a unique level of collaboration and expertise-sharing that traditional investment models cannot provide.Not only does sweat equity offer a way for entrepreneurs to conserve capital and mitigate risk, but it also leads to an alignment of goals between business and investor.As an investor, it's essential to explore this innovative approach to investing and consider incorporating it into your investment strategy. By doing so, you’re not only investing in a business but in the potential growth and success of the entrepreneur themselves.Read Also:A Beginners Guide to Listed Investment CompaniesHow to Successfully Turn Around Struggling CompaniesIs Investment Managers A Good Career Path In 2021?

READ MOREDetails
GBP Savings Plan

How To Find The Best GBP Savings Plan

If you are in need of a GBP savings plan, there are many different ways to manage your money within current UK economic conditions.In this article, we will begin by describing some of the ways one can go about finding a plan that will best suit their personal needs and rationale for saving money.This methodical process will allow the user to choose wisely which plan they feel most comfortable with and allow them to proceed with purchasing it.Top 5 Ways To Find The Best GBP Savings Plan1. Obtain a copy of the Minimum Income Requirements (MIR) ChecklistThis checklist is provided by the Bank of England and is a quick reference guide for those interested in finding out if they are able to qualify for any type of savings account.It lists the various factors that one must consider including certain financial requirements, personal details, and limited circumstances. It is important to note that this resource is not comprehensive, but provides a good starting point when looking into saving money.2. Consider Your Payment methodIf you are in need of a GBP savings plan then it is important that you consider your payment method. Banks and financial institutions offer many different ways to manage your money; so make sure that you choose one that you will be able to adhere to and will best suit your needs.The most common methods are direct deposit, a bank transfer, or by making deposits or withdrawals in person at one of the bank's branches. Another aspect to consider is if a bank gives you the ability to write cheques.3. Consider Your Interest RateAs previously mentioned, interest rates will vary depending on the type of account that one chooses to purchase. It is important that you choose a plan with a competitive interest rate so that you may maximize your money and save more in the long run.Also make sure that whatever plan you choose, that it provides a relatively high possibility of being eligible for ATM Cash Withdrawals. It is important to choose a GBP savings plan that suits your current financial situation and set of personal circumstances.4. Consider Your Monthly Deposit AmountUnderstanding how much you are willing to deposit per month into your account will help you in the process of selecting an available option for your savings.To start, make sure that you have the money available to make the initial deposit payment in order to qualify for the account. Once you have been approved for the account and have made the initial deposit, you will be permitted to make monthly deposits that will be put toward your savings.5. Take Advantage of Available Online ResourcesToday's technology provides many different useful resources that one can use to help them in their search for a suitable GBP savings plan.Consider using the internet to find out more information on the subject matter if you are not comfortable with taking advice directly from a financial advisor or banker. Many credible online sources are available to help educate you on the best ways to manage your money.You can find out useful information regarding different institutions, their available accounts, and interest rates. Often you can find online calculators that will help you to determine which plan is best for your personal financial circumstances.ConclusionAs previously mentioned, many different types of accounts are available to the public, some have more restrictions than others.When choosing an account you should try to assess your own personal financial situation and find an account that best suits your needs.Using the methods and resources listed above will allow you to make the most informed decision possible when choosing a GBP savings plan.Additionals:How Money Management And Technology CombineFeatures To Ensure Success Of Your Money Saving ServiceCan Families Be Happier and Healthier And Still Saving Money?A Debate On Saving Money While Using Promo Codes Of Everlane

READ MOREDetails