Legal Guide On Cash Gift Deed In Blood Relation

Among family members, financial assistance is often offered among close relatives, particularly those who are related by blood. These exchanges of funds are usually informal and stem from the love and trust shared between family members. When the amount of money is significant, a Cash Gift Deed is a good way to clarify the situation legally. This will help to avoid misunderstandings or disputes in the future, and it provides strong evidence in case of examination by tax or legal authorities. Moreover, a registered Cash Gift Deed acts as protection under the law for the giver and the recipient as well. It ultimately provides transparency and protects family relationships into the future.

What Is A Cash Gift Deed In Blood Relation?

A Cash Gift Deed in Blood Relation is a legal document used to document the voluntary transfer of money from one person to another where both individuals share blood relation (e.g., parents giving to children, siblings giving to siblings, grandparents giving to grandchildren). It states that the transfer is given out of love and affection without the expectation of consideration in return. This deed formalizes what would usually be an informal transaction and provides a clear record of the gift and the nature of the transfer.

Key elements that define a Cash Gift Deed in Blood Relation:

• Voluntary Transfer: The donor must be able to independently make a cash transfer without any pressure, undue influence, or expectation of any sort of compensation or benefit in exchange for the transfer.
• Specific Sum of Money: The deed provides information on a specific amount of cash. If the amount is ambiguous, there may be issues with establishing a legal gift.
• Blood Relation: The transaction is between parties who are blood relatives; this is important because the legal treatment of gifts to blood relatives is, in many instances, not the same as gifts to persons who are not blood relatives, especially for tax purposes.
• Love and Affection: The reason for the gift is usually love and affection, or to support the family. This is usually reflected in the deed.
• No Consideration: Unlike a sale/exchange, gifting may not have any consideration. The recipient does not exchange anything of monetary value for the cash gift.
• Written and Executed Document: Such transfer becomes complete by passing a formal written personal delivery of the transfer document, together with the signing of the same by the donor and donee, often witnessed and registered to enhance its legal authority.

Significance Of Cash Gift Deed In Blood Relation

Any gifts provided in the law with a sample to signify their significance in the relationship are known as a Gift Deed.

Clear Record of Transaction

It gives a clear written record of the cash transfer, and removes any potential future miscommunication or dispute regarding the transaction (ex. a gift or a loan).

Tax Implications

In general, gifts received from blood relatives are not treated as income and are not taxable under Section 56(2)(x) of the Income Tax Act, 1961. A Cash Gift Deed is an important record of the relationship, and demonstrates the payment received is a gift and satisfies the criteria for an exemption and should not be regarded as income. If not, the recipient would be challenged by the tax authorities.

Avoiding Future Legal Complications

For larger transfers of wealth, a Gift Deed is a part of estate planning, to make these transfers to your intended beneficiaries while you are alive in order to lessen the financial burden on your estate when you die.

Preventing Future Legal Disputes

In these uncertain times when legal disputes are common, if the donor dies or a legal dispute involves either party, having a Gift Deed establishes the documentation of the donation and its intention; therefore, if the donor charged the recipient after the fact, the payment could not be construed as a loan, inheritance, or other transfer.

Protection Against Claims

If a Gift Deed is registered and there is no fraudulent intent at the time of gifted value, donors can take some comfort knowing that the value gifted will have a measure of protection from unlawful claims from creditors and other parties in the future.

Assisting Loans

If the recipient of a gift later uses this money for a purchase of an asset and has to apply for a loan, a Gift Deed identifies the source of wealth.

Rule For Cash Gift Deed In Blood Relation (Legal Consideration)

Cash gifts being exchanged within blood relations are generally considered as being permissible, but must be made in light of numerous legal contexts.

• Competence of the Donor: The donor must not be a minor and must be of sound mind to be competent to contract. Section 11 of the Indian Contract Act, 1872 defines who is to be competent to contract.
• Voluntary Consent: Any gift must be given voluntarily with the free consent of the donor. Any transfers made under coercion, fraud, or undue influence shall be invalid (Sections 15, 16, 17 of the Indian Contract Act, 1872).
• Relationship by Blood: The donee must have a blood relationship with the donor according to the Income Tax Act for the exemptions to apply to gifts. Blood relationships typically include lineal ascendants and descendants (parents, grandparents, children, grandchildren), siblings, spouses of lineal ascendants and descendants, and some other relatives specified under the Income Tax Act, 1961.
• Transfer of Ownership: Although it's a cash gift, the deed signifies the transfer of ownership of that specific sum from the donor to the donee. The donee gains complete rights over the gifted amount.
• Acceptance by the Donee: Although there is no mention of acceptance in the context of cash gifts, the donee's acceptance is usually presumed when they accept and spend the money. On the other hand, with a gift of immovable property and commissions of land, it is a very serious matter, and the acceptance is paramount, usually in writing. In the case of cash, acceptance will usually be sufficient when it is received, as already discussed.
• Registration (Optional but Advisable): Although not needed to make a cash gift deed valid, registering a cash gift deed under the Registration Act, 1908, is the best way to demonstrate that it was executed by the donor and that the signature of the donor is authentic. Registering requires both the donor and donee to appear before the Sub-Registrar.
• Tax Laws: As previously indicated, gifts are not subject to tax for a recipient when the gift is from a blood relative under the Income Tax Act, 1961. But the donee must record both the relationship and the gift nature properly in order to use the exclusion. The donor will usually not have a specific tax liability when they gift cash. However, in extreme cases of gifting cash, the total will become part of their aggregate estate, including for the estate duty (though there is currently no estate duty in force in India).

Key Components Of A Cash Gift Deed

• Title of the Deed: Clearly state "Cash Gift Deed."
• Details of the Donor: Full name, address, age, occupation, and relationship to the donee.
• Details of the Donee: Full name, address, age, occupation, and relationship to the donor.
• Statement of Gift: A clear declaration by the donor that they are voluntarily gifting a specific sum of money to the donee out of love and affection, without any consideration.
• Specific Amount of Gift: The exact amount of cash being gifted should be mentioned in clear numerical and word form (e.g., "Rupees One Lakh Only (₹1,00,000)").
• Mode of Transfer: Specify how the cash was or will be transferred (e.g., bank transfer, cheque, cash in hand). Include details like bank account numbers, cheque numbers, and dates if applicable.
• Declaration of Ownership: A statement by the donor confirming their absolute ownership of the funds being gifted and their right to gift them.
• Acceptance by the Donee: A statement by the donee acknowledging receipt and acceptance of the gift.
• No Expectation of Return: A clear statement that the gift is absolute and the donor has no expectation of the donee returning the money.
• Witnesses: Names, addresses, and signatures of at least two credible witnesses who were present during the signing of the deed by the donor and donee.
• Signatures of Donor and Donee: Signatures of both the donor and the donee, along with the date and place of signing.
• Schedule (Optional): If there are any specific conditions attached to the use of the gifted money (though rare in simple cash gifts within blood relations), they can be mentioned in a schedule.

Drafting Cash Gift Deed In Blood Relation

Drafting a Cash Gift Deed requires careful attention to detail to ensure its legal validity and effectiveness.

Process for Cash Gift Deed In Blood Relation

• Research Information: Gather all relevant information, including that of the donor, donee, the gift amount, and mode of transfer.
• Prepare Draft: Draft the Gift Deed. Include all the relevant information from above, using clear and unambiguous language.
• Review and Finalize: Get donor and donee to review the draft carefully to verify that all of the information correctly reflects the intent of the parties. Make amendments as needed and finalize.
• Execute: Have the donor and donee sign the Gift Deed in the presence of two personally credible witnesses. Then, the witnesses will have to sign the deed, verifying the donor's and donee's signatures.
• Stamp Paper (When Required): There is no stamp duty on cash gifts; however, it would be a little more formal using stamp paper for the deed and thus will give is some legal weight. The stamp paper value will probably be nominal. Check your local sources for specifics.
• Registration (Optional but Recommended): To register the Gift Deed, schedule an appointment at the Sub-Registrar's office in your jurisdiction. On the appointed day, the donor, donee, and the two witnesses must appear before the Sub-Registrar along with the original Gift Deed and their identification proofs. The Sub-Registrar will verify the identities and the document, and upon satisfaction and payment of the nominal registration fee, will register the deed.

Essential Document Required

• Original Gift Deed (duly signed by the donor, donee, and two witnesses).
• Identification proof of the donor (e.g., Aadhaar Card, Passport, Voter ID).
• Address proof of the donor.
• Identification proof of the donee.
• Address proof of the donee.
• Identification and address proof of the two witnesses.
• PAN card of the donor and donee (for tax purposes and registration).
• Bank statements or transfer receipts as proof of the cash transfer.

Legal Validity Of Cash Gift Deed

A Cash Gift Deed that is properly drafted, signed by a competent donor with free consent, accepted by the donee, and attested by at least two witnesses is legally valid. Registration, though optional, provides an additional layer of legal certainty and makes it more difficult to challenge the deed later.

Legal Advantage Of Cash Gift Deed In Blood Relation

• Clear Title and Ownership: It clearly establishes the donee's ownership of the gifted cash, preventing future claims or disputes.
• Facilitates Tax Exemption: It serves as concrete proof of the gift from a blood relative, making it easier for the donee to claim tax exemption under Section 56(2)(x) of the Income Tax Act, 1961.
• Stronger Legal Standing: A registered Gift Deed has a stronger legal standing and is less likely to be challenged in court compared to an informal cash transfer.
• Avoids Future Misinterpretation: It prevents the cash transfer from being misconstrued as a loan, inheritance advance, or any other type of transaction.
• Protection in Legal Proceedings: In case of legal issues faced by either the donor or the donee, the Gift Deed provides clear evidence of the nature of the financial transaction.
• Estate Planning Tool: It can be a useful tool in estate planning, allowing for the transfer of assets during the donor's lifetime.

Sample Format Of Cash Gift Deed in Blood Relation

The format is as follows:

Conclusion

A Cash Gift Deed between blood relatives is a legally solid approach to formalizing monetary assistance due to family love and affection. A Cash Gift Deed provides a fair record of the transaction between the parties and can carry important benefits, especially in terms of tax implications and later avoidance of legal ambiguity. By learning about legal considerations, essential clauses, and the drafting of a Cash Gift Deed, you can formalize a good attitude with proper documentation and legal protection, creating an open and amicable family relationship.

FAQs

A few FAQs are:

Q1. What is a Cash Gift Deed in blood relation?

A Cash Gift Deed in blood relation is a legal document recording the voluntary transfer of a specific sum of money between blood relatives (like parents, children, siblings) without any expectation of return. It formalizes the gift and helps in establishing its nature for legal and tax purposes.

Q2. Is a Cash Gift Deed necessary for money given to family?

While not always legally mandatory for small amounts, a Cash Gift Deed is highly recommended for significant cash transfers within blood relations. It provides a clear record, helps in claiming tax exemptions under Section 56(2)(x) of the Income Tax Act, 1961, and prevents future misunderstandings or legal complications.

Q3. What are the tax implications of a cash gift from a blood relative in India?

Gifts of money received from specified blood relatives are generally exempt from income tax in the hands of the recipient under Section 56(2)(x) of the Income Tax Act, 1961. A properly executed Cash Gift Deed serves as crucial documentation to prove the relationship and the nature of the receipt as a gift.

Q4. Does a Cash Gift Deed need to be registered in India?

Registration of a Cash Gift Deed is optional under the Registration Act, 1908. However, it is advisable to register the deed, especially for larger sums, as it provides stronger legal evidence of its execution and authenticity, making it more difficult to challenge in the future.

Q5. What are the essential documents required for a Cash Gift Deed?

Essential documents typically include the Gift Deed itself, identification and address proofs of the donor and donee, their PAN cards, and identification and address proofs of two witnesses. If the transfer has occurred, bank statements or transfer receipts should also be included.

Disclaimer: The information provided here is for general informational purposes only and should not be construed as legal advice. For personalized legal guidance, please consult with a qualified Civil lawyer.