NRIs and PIOs can acquire residential or commercial property by way of gift from a resident of India

The popular perception among non-resident Indians (NRIs) is that Indian real estate laws pertaining to inheritance of acquisition by way of gift are very complicated, but that is not really the case. In fact, they are quite simple.

NRIs and persons of Indian origin (PIOs) can acquire residential or commercial property by way of gift from a resident of India or an NRI or a PIO. On the other hand, a foreign national of non-Indian origin resident outside India cannot acquire residential or commercial property in India by way of gift.

However, any person resident outside India cannot acquire agricultural land/plantation/farm house in India by way of gift.

What is a gift?

Gift is defined under section 122 of the Transfer of Property Act, 1822 as: “the transfer of a certain existing immovable property made voluntarily and without consideration, by one person, called the “donor”, to another, called the “donee” and accepted by and on behalf of the donee.”

In other words, a gift is the transfer of an existing property and not of any future property. It must be made voluntarily and without compensation. It must be accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor. The donee can even be a minor (below 18 years of age). Also, the basic element of a gift is that it is given out of natural love and affection.

Transfer of gift

Section 123 provides that for making the gift of immovable property, the transfer must be affected by a registered instrument signed by the donor and attested by at least two witnesses. The transfer or handover may be made in the same way as goods sold may be delivered. Section 128 highlights that where gift consists of the donor’s whole property, the donee is personally liable for all the debts due by and liabilities of the donor at the time of the gift to the extent of property comprised therein.

A deed of gift of an immovable property is required to be registered as provided under the Registration Act signed by or on behalf of the donor and attested by at least two witnesses. The title cannot pass without there being a registered deed of gift.

Repatriation of FUNDS

Sale proceeds of immovable property acquired by way of gift should be credited to a non-resident (ordinary), or NRO, account only. From this NRO account, NRIs and PIOs can remit up to $1 million per FINANCIAL year, subject to satisfaction of the authorized dealer and payment of applicable taxes. Rules and regulations on gifts very specifically clarify that any ambiguity in terms of process and handover should be avoided. NRIs very often witness such transactions but have no clarity on the process.