A parent gifting a flat or land to an NRI child, what it costs and what carries over

When a parent gifts a property to a child, the child receives it without paying income tax, no matter how valuable it is. A parent and child are relatives under the gift law (Section 56(2)(x)), so the exemption is complete and there is nothing to declare as income for receiving the property.

Stamp duty is a different animal. It is a charge levied by the state where the property sits, payable to register the gift deed, and the basis is set by each state. In many states it is a percentage of the property's value, usually the circle-rate or ready-reckoner value, but several states charge a lower or capped amount when a parent gives property to a child. It is a state levy, wholly separate from income tax, and it is due even though the gift is income-tax free. Even where a lower or capped rate applies, some duty and a registration fee are still payable.

So the headline is worth holding onto: the family pays no income tax on the gift, but it does pay stamp duty and registration to make the transfer legally effective. The two are often confused, and budgeting for the second is what avoids a surprise at the sub-registrar's office.

A gift of immovable property only takes legal effect when it is made by a written gift deed and that deed is registered. A verbal promise, or a deed that is signed but never registered, does not transfer title. The deed names the donor (the parent) and the donee (the child), describes the property, records that it is given out of love and affection without any payment, and is signed and registered at the sub-registrar's office where the property is located.

Because the NRI child is usually abroad, the practical question is presence. Registration can often be handled through a properly executed power of attorney so the child does not have to travel, but the power of attorney itself has to be drawn and attested correctly, frequently at an Indian consulate abroad, for the registrar to accept it. This is where a transfer most often stalls, so it is worth setting up before the deed is drafted.

The accepted value of the property at the time of the gift should be recorded with care, because it feeds two later things: the stamp duty now, and the paper trail the child will need when they sell.

The most overlooked part of gifting property is what happens years later when the child sells it. For capital gains, the law does not treat the gift as a fresh start. The child inherits the parent's original purchase cost and the parent's holding period (Section 49(1) and Section 2(42A); Section 73(1) and Section 2(101) of the Income-tax Act 2025 for a sale from 1 April 2026). The gain is the sale price minus what the parent originally paid, with no indexation for an NRI seller on a sale from 23 July 2024, not minus the property's value on the day of the gift. If the parent bought before 1 April 2001, the child can use the property's market value on 1 April 2001 instead of the original cost, capped at its stamp-duty value on that date.

The upside is the holding period: because the parent's years are added to the child's, a long-held family property usually qualifies as a long-term asset immediately, with the more favourable long-term treatment. The downside is the base cost. An old flat bought decades ago for a small sum can carry a large embedded gain that surfaces entirely in the NRI child's hands on sale.

For an NRI selling Indian property, that sale also brings TDS to manage. The buyer is required to deduct tax at source on the sale to a non-resident, and reducing it usually means a lower-deduction certificate (Form 128 under Section 395, formerly Form 13). The point for the moment of gifting is simply to keep the parent's purchase documents. The original sale deed, cost records, any improvement bills, because those are the papers that will compute the gain correctly when the day comes.

Alongside the tax position there is an exchange-control question: is an NRI even permitted to receive this property? For most property the answer is yes. Under FEMA (the Non-Debt Instruments Rules 2019), an NRI or OCI may acquire residential or commercial property in India by way of gift from a relative, whether that relative lives in India or is also an NRI or OCI. Relative here follows the Companies Act 2013 definition, which includes a parent.

The important exception is the kind of land. An NRI cannot acquire agricultural land, a farmhouse or a plantation property by gift. That restriction applies regardless of the family relationship. A residential flat or a commercial property is fine; farmland is not. If the family asset is agricultural, the transfer has to be thought through differently, and that is worth checking before any deed is drafted.

No separate RBI approval is needed for a permitted gift of residential or commercial property from a relative to an NRI or OCI. It is a general permission, but the nature of the land has to be confirmed first.

Suresh Iyer, retired in Chennai, wants to gift his Adyar flat to his son Karthik, who has lived in the US for a decade. The flat is residential, so FEMA permits the gift to an NRI son, and as a gift from father to son it carries no income tax for Karthik.

What the family does budget for is stamp duty and registration, charged by Tamil Nadu at its rate for a settlement deed in favour of a family member, to register the gift deed. Because Karthik can't easily fly down, he executes a power of attorney at the Indian consulate so the deed can be registered on his behalf, and Suresh hands over the original 1990s purchase deed and cost papers to keep on file.

Years later, if Karthik sells, his gain is measured from Suresh's original cost. Because the flat was bought before April 2001, Karthik can use its market value on 1 April 2001 instead, capped at the stamp-duty value on that date. It is not measured from the flat's value on the gift date. The buyer will deduct TDS on the sale to an NRI, which Karthik can apply to reduce with a lower-deduction certificate (Form 128 under Section 395, formerly Form 13). Nothing here is a tax on the gift itself; it is simply the cost and the compliance that travel with the property. Doing the deed cleanly now is what keeps that eventual sale straightforward.