Guidelines for Drafting a Gift Deed from Father to Son in India

When a father decides to gift a sum of money to his son, it is crucial to ensure compliance with the Income Tax Act 1961 to avoid any unintended tax implications. Here’s a detailed guide on how to draft a simple and effective gift deed.

Key Components of a Gift Deed

A well-drafted gift deed includes several important elements:

Title of the Document

Clearly state that it is a Gift Deed.

Date and Place

Mention the date and location where the deed is being used.

Parties Involved

Donor: Full name, address, and relationship (father).

Donee: Full name, address, and relationship (son).

Recitals

A brief statement explaining the purpose of the gift, emphasizing that it is a voluntary transfer without any consideration.

Description of the Gift

Clearly describe the amount being gifted, e.g., 'Rs. [amount].'

Declaration

A declaration by the donor stating that he/she is the absolute owner of the gifted amount and has the right to give it away.

Acceptance by the Donee

Include a statement where the son acknowledges and accepts the gift.

No Consideration Clause

Clearly state that the gift is made without any monetary consideration.

Witnesses

Include the names, addresses, and signatures of at least two witnesses who can attest to the execution of the deed.

Notarization

Although not mandatory, getting the deed notarized can add an extra layer of authenticity.

Sample Gift Deed Template

GIFT DEED

Date: [Date]

Place: [Place]

This Gift Deed is made on this [date] day of [month] [year] by:

Donor:

[Fathers Full Name]

[Fathers Address]

And

Donee:

[Sons Full Name]

[Sons Address]

WHEREAS the Donor is the absolute owner of the sum of Rs. [amount] and desires to give this amount as a gift to the Donee out of love and affection.

NOW THIS DEED WITNESSETH AS UNDER:

The Donor hereby gives transfers and conveys to the Donee the sum of Rs. [amount] as a gift. The Donee hereby accepts the gift. The Donor declares that this gift is made voluntarily and without any consideration. The Donor confirms that he/she is the rightful owner of the gifted amount and has full authority to make this gift.

IN WITNESS WHEREOF the parties have set their hands to this Gift Deed on the day [day] [month] [year].

Witnesses:

_____________________________ Name: [Name of Witness 1], Address: [Address of Witness 1] _____________________________ Name: [Name of Witness 2], Address: [Address of Witness 2]

Donors Signature: ________________________

Donees Signature: ________________________

Important Considerations

Tax Implications

Under Section 56(2)(x) of the Income Tax Act, gifts from relatives, including gifts from parents to children, are not taxable in the hands of the recipient. However, ensure that the relationship is clearly stated in the deed.

Documentation

Keep a copy of the gift deed for personal records. It's advisable to maintain a record of the transaction, such as bank statements showing the transfer of the gifted amount.

Consult a Professional

It's wise to consult with a legal professional or a tax advisor to ensure that the deed complies with all legal requirements and tax regulations.

By following these guidelines, you can draft a gift deed that minimizes tax implications under the Income Tax Act 1961.