Category: NRI

Non-resident Indians (NRIs) often wish to transfer their immovable property in India to family members. When gifting an immovable property, two common questions arise:

• Can NRIs gift property to their parents?
• What are the tax implications of gifting Property to Parents?

CAN NRIs GIFT PROPERTY TO THEIR PARENTS?

Yes, NRI can gift property to their parents in India. Let me share the key aspects of gifting property

ELIGIBILITY

• NRIs can gift property to their parents. The NRI must hold a PAN Number
• The recipient (parent) must be an Indian resident and must hold Aadhaar or PAN Number

TYPE OF PROPERTY THAT CAN BE GIFTED

• NRIs can gift both residential or commercial properties to their parents

GIFT DEED REQUIREMENTS

• The transfer of property must be done through a gift deed, which should be properly drafted and executed
• The gift deed must be registered with the sub-registrar office, and the applicable stamp duty must be paid

TAX IMPLICATIONS OF GIFTING PROPERTY TO PARENTS

TAX ON THE GIVER (NRI)

• The NRI does not have tax liability on gifting property to their parents in India.
• If NRI sells the property through a Sale Deed, a TDS of around 20% of the selling price is applicable. However, gifting the property via a Gift Deed eliminates the TDS

TAX ON THE RECEIVER (PARENT)

• Since parents are close family members, any gift received from their child is not taxable
• However, if the parents decided to sell the gifted property in the future
  • They will be liable for TDS on the sale proceeds
  • TDS at 1% applies if the sale value exceeds Rs. 50 lakhs
  • No TDS is applicable if the sale value is below Rs. 50 lakhs

STAMP DUTY AND REGISTRATION CHARGES:

• While the TDS does not apply, stamp duty and registration charges must be paid before the gift deed registration
• The stamp duty varies by state and it is usually around Rs. 5,000 for transfer between family members

PROCEDURE TO GIFT A PROPERTY TO PARENTS

Let me explain the procedure with a real example. One of my NRI clients is residing in California, USA. wanted to gift his 3BHK flat in Bangalore to his mother so she could rent it out and generate income. Since NRI could not travel to India for the registration, we followed a structured procedure to complete the transfer effectively

GENERAL POWER OF ATTORNEY (GPA)

• As the NRI was unable to visit India, he decided to execute a General Power of Attorney (GPA) in favor of his mother, allowing her to complete the gift deed registration on his behalf.
• We drafted the GPA, printed it in California, got it notarized, and couriered it to India.
• In India, the GPA was adjudicated at the District Registrar’s office. The adjudication fee was Rs. 500

Refer to the below GPA Image

E-KHATA (ELECTRONIC PROPERTY RECORD)

• The property had a manual Khata, but an e-Khata was mandatory for gift deed registration in Bangalore.
• Aadhaar is required to apply for an e-Khata online. Since the client is an NRI and does not have an Aadhaar card, (he has only a PAN), we applied for the e-Khata using the mother’s Aadhaar for e-KYC.
• After submitting the application online, we needed to update the ID proof from the mother’s Aadhaar to the son’s PAN. For this, we submitted the following documents at BBMP
  • Application acknowledgment
  • Son’s PAN card copy
  • Son’s Passport size photo
• The Assistant Revenue Officer (ARO) updated the ID proof and photo in the existing application. We received the verified e-khata on the same day, refer to the below image

DRAFT THE GIFT DEED

• The Gift deed included the following details
  • Title, date, and place of execution
  • Details of the donor (NRI) and donee (mother)
  • Property Description
  • Terms and conditions
  • Details of two witnesses
• The draft was printed on document paper
• Since the mother was the NRI’s GPA representative, she signed the Gift Deed as the donor’s representative and then signed again as the donee (recipient of the gift).
• Two witnesses also signed the gift deed

PAYMENT OF STAMP DUTY

• We submitted the Gift Deed application on Kaveri Online Services for document verification and approval
• The applicable Stamp Duty and Registration charges were paid, totaling Rs. 7,165 including the scanning fee
• Once the payment was completed, we booked an appointment for Gift Deed Registration

REGISTRATION OF GIFT DEED

• On the scheduled date, the following parties visited the sub-registrar’s office for registration:
  • The mother (NRI’s GPA representative)
  • The mother again (as the gift recipient)
  • Two witnesses
• Biometric verification and photographs were taken as part of the registration process.
• The Gift Deed was successfully registered, and property ownership was transferred from NRI to the mother.

Refer to the below-registered Gift Deed

CONCLUSION

By following this structured process, we successfully transferred ownership of the property from the NRI to his mother. This allows her to rent out the property and generate the rental income.

Need Assistance with Property Gifting?

If you’re an NRI looking to gift property to your family in Bangalore and need expert guidance, feel free to reach out:

📞 WhatsApp / Contact: +91-9742479020

📧 Email: pgnproperties@gmail.com

Before I advise how NRI manages the property in India, let me tell you how NRI should not manage the property

• Never sub-lease your property.
• Never associate with a property management company or property manager who charges you recurring fee (Ex: monthly service fee, monthly commission, or recurring brokerage)

Trust me, most property management companies in India use your property to increase company profit and are least bothered to pay your due returns. Most property management companies don’t even bother to think about your emotional attachment towards your property.

For Example :

• Under market value: Sub-leasing companies undervalue your property with you. They pay less rent and security deposit than the actual market value. But they quote exceptionally more rent to tenants.
• Lack of information: Most sub-leasing companies doesn’t share the true information of your property condition like tenant name, tenant profession, rent, security deposit drawn from tenant, how many people stay in property and structural damages to property during tenancy, etc..
• Hedging to increase company profit: Leasing company accommodates 7–8 people in a room instead of nominal accommodation of 3 people. They don’t care about damages incurred to property due to over accommodation.
• Illegal renting: Renting residential property for commercial use of office or small scale factory is illegal but some sub-leading companies do such act to increase profit
• Hefty cut in payment: Sub-leading companies draw more rent from tenant and pay less to you. (your returns would be more if you deal directly with tenant instead 3 parties)
• Year on year rental appreciation: Sub-leasing companies renew yearly rent with tenant but they don’t pass on this rental increment to you until you insist on this.

Above are just few examples and there are many other ways that your property would misuse by sub-leading contract.

Having been work with many NRIs, most NRIs regret the decision of appointing 3rd party leasing company because of poor returns, poor maintenance of property, and lack of communication.

Eventually NRIs realize the blunder and have to fight with leasing company to terminate the sub-leasing contract and get rid of this mess.

Now comes to the question, NRI can manage the property by appointing a local guide who doesn’t sub-lease the property.

A local guide could be your friend, relative, colleague, broker, property manager, or property management company under the following terms

• Rental Agreement will be done directly between property owner and tenant (strictly no sub-leasing). Make sure that you have all information about your tenant including screening and ID proofs.
• All the financial transactions of monthly rent and security deposit transferred directly between tenant and property owner (no fund is routed through 3rd party)
• The task of your local guide is to fill the gap of your geographical constrain and coordinate for your local needs.
• No recurring payment to your local guide. Payment is one time and its task basis.

It’s always not pleasant to leave your property matters to your friend, relative, or colleague, it some time bitter. so hire a decent broker, property manager, or property management company that complies with only coordination work and open rental agreement between owner and tenant (strictly no sub-leasing).

We at PGN Property Management: We provide property management service under following terms & conditions

• We never ever sub-lease the property. Property will be rented directly between owner and tenant. We just take care of your ground to fill the gap of your geographical constraints.
• All the financial transactions take place directly between tenant and owner. No fund is routed through us unless require from your end
• We take care of scouting tenant for your property + tenant screening + facilitating rental agreement + agreement delivered at your door step.
• We don’t have recurring payments of monthly service fee, monthly commission or annual recurring brokerage. Our payment is just one time and task basis.
• We follow up on grievances of non-payment of rental and tenant complaints, if require.
• We will be a witness in rental agreement to assure our consistent service
• We take care of termination process of outgoing tenant and onboard of new tenant, Our service includes property inspection + provide an estimate for repairs so you have an idea to refund balance security deposit to outgoing tenant + repair work of plumbing, carpentry, electrical, painting, and cleaning. We provide valid receipts for all the material purchases and update work progress consistently.
• Utility bill payment of electricity, water, and LPG

To opt for our service, please write to us pgnproperties@gmail.com or WhatsApp to +91-97424 79020.

Thank you for reading…