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Gift Deed vs. Will: How NRIs Can Claim Gift Tax Exemptions When Transferring Assets

Key Takeaways

  • FEMA allows NRIs to transfer cash, jewellery, property, securities and other assets to individuals or entities in India.
  • NRIs can use a gift deed or a will to transfer their assets.
  • A gift deed allows immediate transfers, must be registered, and might incur tax implications.
  • A will allows NRIs to transfer assets after their demise and such transfers are exempt from any gift tax.
19 May 2025 by Team FinFIRST

As an NRI, you might want to transfer your assets to your loved ones. Whether it is cash, property, jewellery or any other asset that you own, you have the right to gift it to whoever you want. The Foreign Exchange Management Act (FEMA) allows NRIs to gift their assets to their loved ones back home.

While gifting or transferring of assets is allowed, the transfer can incur a tax both in your hands and in the hands of the recipient. However, there are ways to claim gift tax exemptions so that the gift becomes tax-free for the recipient. 

Before understanding how to claim gift tax exemptions, let’s understand how NRIs can transfer their assets to others.

How can NRIs transfer assets?


NRIs can use two legal ways to transfer their assets. These ways are described below -

1. NRI gift deed


An NRI gift deed is a legal document which allows NRIs to give monetary gifts to individuals or entities in India. Key features of a gift deed include:

a. The deed can be used to transfer movable and immovable property like cash, valuables, property, etc.

b. The gift deed should be executed on a stamp paper and signed by both the donor (NRI) and the donee (resident recipient)

c. The gift deed should be registered per the provisions of Section 17 of the Registration Act of 1908

2. Will


A will is a legal document that declares the NRI’s intentions regarding the distribution of their property after their demise. The features of a will are as follows -

a. The will gives NRIs complete ownership and authority over their assets when they are alive. After their demise, the will outlines the division of the assets among the named beneficiaries

b. NRIs can create a separate will for their assets in India

c. You are required to sign the will along with two witnesses attesting the will

d. You can prepare the will yourself or take the help of legal professionals

Comparative analysis of gift deed and will


Both the gift deed and will help NRIs transfer their assets. However, both these documents are completely different from one another. Here’s a table outlining the comparison between the two -

Parameters Gift deed Will
Who executes the document? NRI NRI
When are the assets transferred? Immediately After the NRI’s demise
Registration Mandatory Not mandatory but recommended
Revocability Not revocable. Once executed, the gift deed becomes binding A will is revocable and can be changed during the NRI’s lifetime
Costs involved Cost of stamp paper and registration Costs are minimal if the will remains unregistered, though registration is recommended for security.
Tax implications Capital gains tax might be applicable for the NRI No tax is applicable since the transfer is not immediate
Court involvement Not needed if the deed is properly executed Court-ordered probate is a must to execute the will
Recipient’s acceptance Recipient’s acceptance and signature are a must No acceptance is needed

 

Tax implications on the transfer of assets


Here are the tax implications of transferring assets through gift deeds or wills -

1. Tax implication of gift deeds


If you transfer cash or other assets through a gift deed, gifts valued up to ₹50,000 would be fully tax-free in the recipient’s hands. However, if the value exceeds ₹50,000, the full value of the asset would be taxed in the recipient’s hands under the head ‘Income from other sources. 

That being said, gift tax exemptions are available on gifts exceeding ₹50,000. These tax exemptions are as follows -

a. If you transfer the asset to a relative, the transfer would be tax-free. A relative, in this context, means your spouse, parents, siblings, spouse’s siblings, parent’s siblings, or you and your spouse’s lineal ascendants or descendants

b. If you transfer the asset on the occasion of marriage, the transfer will not attract any tax

However, the receiver would have to justify the nature and source of the asset transfer to claim the gift tax exemption.

2. Tax implication of wills


Any transfer of assets through a will is completely tax-free. Inherited assets are exempt from gift tax under Section 56(2)(x). However, if the recipient later sells the asset, capital gains tax may apply based on the original cost of acquisition.

Common pitfalls to avoid when transferring assets
 

While NRIs can transfer their assets through a gift deed or a will, a seamless transfer can make the job easier. To do so, here are some mistakes to avoid -

 

Mistake Consequence Solution
Ignoring the tax implication You or the recipient might have to pay heavy taxes on the value of the asset transferred Check the tax implication. Try to maximise the gift tax exemptions so that the recipient can save taxes on the gifts received
Ignorance of the legal procedures Incorrect execution of the gift deed or will, which might render them useless or delay the transfer Understand the legal protocols involved. Take professional help if needed
Not registering the gift deed or will The gift deed will be invalid, while the will can be disputed or tampered with Register both the gift deed (mandatory) and the will for faster transfers
Choosing the wrong instrument The assets will not be transferred when you want them to Choose between a gift and a will, depending on the timing of the transfer. A gift deed is good for immediate transfers, while a will is good for inheritance

 

How to transfer assets seamlessly?
 

Here are some tips that can help you transfer your assets to your loved ones without hassles -

  1. Open an NRI account for seamless transfer of cash assets
  2. Try and execute a gift deed when you are in India so that the recipient can sign it and also register simultaneously
  3. Choose a secured transfer gateway to avoid the risk of cybercrimes
  4. Inform the recipient of the transfer so that they can claim the assets in time

With a secure digital platform and a range of NRI banking solutions, enjoy risk-free transfers and send funds instantly. Transfer assets beyond borders and enjoy gift tax exemptions too.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

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