Q2. Query Regarding Gift Deed and Tax Implications. Regarding the transfer of property: My mother wishes to sell the property and transfer the amount received from the sale to her two sons and one daughter. In this situation, should she gift the money received from the sale to avoid taxes? Option 2: Should she gift the property to her two sons and one daughter so that they can subsequently sell the property? Which option should we choose to minimize the tax liability?

Advocate Karthik Kalaimani answered:
Based on the facts and circumstances, Option 1 may be a more appropriate course of action, particularly considering the owner’s age and the availability of applicable tax benefits. Under this option, the owner may sell the asset and subsequently gift the sale proceeds to her children. Since money is movable property, a gift of money can be made to the children, with the transaction properly documented. A gift deed or other appropriate documentation may be executed to clearly record the intention to gift and the details of the parties involved. However, tax implications may arise at the time of sale of the property, including capital gains tax and other provisions under the Income-tax Act. The tax treatment, exemptions available, and any future tax implications should be carefully assessed. Therefore, although gifting the sale proceeds is legally feasible, it is advisable to consult a Chartered Accountant or tax professional before proceeding so that the tax consequences and compliance requirements can be properly evaluated.