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Introduction
If you’re an Indian parent wondering how to transfer your property to children living abroad, you’re not alone. Many parents worry about securing their assets and ensuring a smooth transfer to their children. So, what’s the best way to do it? Let’s go step by step and explore the legal and tax aspects of three common options:
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Option 1: Gift Deed
A gift deed is a simple way to transfer ownership of your property to your children without selling it.
Legal Aspect
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If the property is self-acquired (bought with your earnings), gifting it is completely legal.
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For inherited property, gifting could lead to disputes unless it is distributed according to the Hindu Succession Act.
Tax Aspect
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Great news! There’s no tax liability on property gifted from parents to children.
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Earlier, there was a gift tax, but it has been abolished. Neither you nor your children need to pay taxes for this transfer.
When Does Gifting Work Best?
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When your children want to keep the property, such as a family home you’re living in, or if they plan to use it when visiting or returning to India.
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If you want to avoid disputes among your children. Settling everything with a gift deed ensures clarity while you’re still alive.
Important Note
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For residential property or land, the gift deed must be registered.
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For movable assets, like jewelry, a simple gift deed is enough, and registration isn’t required.
Option 2: Will
A will is the best option if you want to keep control of your property during your lifetime and ensure a smooth transfer later.
Legal Aspect
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A will lets you decide who gets what and allows you to divide both self-acquired and inherited property.
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It’s especially useful if you’re worried about potential misuse of the property, such as your children selling it too soon or evicting you from your home.
Key Recommendations
1. Register the will: While not mandatory, a registered will is harder to contest in court.
2. Appoint two executors:
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One family member.
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One independent professional (e.g., a lawyer, CA, or doctor).
Tax Aspect
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Like a gift deed, there’s no inheritance tax in India.
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Your children will only pay taxes if they decide to sell the property later.
Why Choose a Will?
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It’s ideal for a mix of self-acquired and inherited assets.
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You keep full control of the property during your lifetime.
Option 3: Selling the Property and Transferring the Proceeds
Some parents prefer to sell the property themselves and send the proceeds to their children abroad.
When Is This a Good Idea?
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If the property is large or complex, such as agricultural land or jointly owned property.
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If your children live far away and might struggle to handle the sale themselves.
Legal Aspect
When selling the property:
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You must pay applicable taxes, such as capital gains tax.
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A 20% TDS (Tax Deducted at Source) is applied when transferring money abroad.
Important About TDS
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The 20% deduction isn’t an extra tax. It’s an advance tax that you can claim as a refund when filing your income tax return.
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This ensures the government collects taxes before the money leaves India.
Alternative to Save on TDS
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Instead of selling the property yourself, you can gift it to your children. They can sell it themselves and transfer the money abroad. This way, the TDS is applied only once—when the property is sold.
How to Choose the Best Option
Here’s a quick summary of the three methods:
1. Gift Deed
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Best for self-acquired property.
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Useful for resolving disputes while you’re still alive.
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Registration is mandatory for immovable assets.
2. Will
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Ideal for a mix of self-acquired and inherited property.
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Allows you to retain control during your lifetime.
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Registered wills are harder to contest.
3. Selling the Property
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Recommended for large or complicated properties.
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You handle the sale and transfer the proceeds abroad.
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Alternatively, children can sell the property to avoid double TDS.
Conclusion
The best method depends on your family’s specific needs:
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A gift deed is quick and simple.
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A will offers flexibility and long-term control.
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Selling the property lets parents manage everything themselves.