[Opinion] Gifts And Inheritances – A Brief Analysis

CA S. Krishnan – [2023] 151 taxmann.com 135 (Article)

1. Introductory Remarks

Gift as per the Income-tax Act (the Act) means property (both movable and immovable) and money (cash, cheque, draft, etc) received without consideration or against inadequate consideration. Let’s understand what movable and immovable property include on which income tax provisions apply:

• Immovable property: Land or building or both (it does not include agricultural land in rural areas)
• Movable property: Shares, securities, jewellery, archaeological collection, drawing, painting, any work of art, bullion, vehicles, etc.

One’s property including assets acquired through ancestral ones get passed on to his/her legal heirs -children, grandchildren or wards after he/she passes away. In many countries, the heir must pay Inheritance Tax for inheriting any such property or assets from parents or grandparents or any other relative or friend.

However, in India, the concept of levying tax on inheritance does not exist now. The inheritance tax as it was called Estate Duty was abolished with effect from 1985.

2. What is a gift and what are its special features?

2.1 According to section 122 of the Transfer of Property Act 1882 “gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration by one person called the donor to another called the donee and accepted by or on behalf of the donee.

A gift is a voluntary conveyance, that is, conveyance not founded on consideration of money or money’s worth.

A gift is the act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another person without any consideration.

2.2 Different kinds of gifts and their features

Gifts are of two kinds:

(i) Gifts inter vivos and

(ii) gifts causa mortis.

A gift inter vivos, is the legal term that refers to a transfer or gift made during the grantor’s life. Inter vivos gifts, which include property related to an estate, are not subject to probate taxes since they are not part of the donor’s estate at death. An inter vivos transfer is one made during the grantor’s lifetime.

A gift causa mortis is a gift of personal property made with the expectation that the person giving the gift will soon die.Gift causa mortis is when a person provides a gift to another because they believe that will he soon die. This type of gift, unlike a transfer via Will or gift inter vivos, is revocable by the grantor until they do pass away and may carry differential tax treatment.

This term derives from the Latin causa mortis, which means “contemplating death.” Gift causa mortis only can come into action after the death of the donor. This is a form of a conditional gift, and the gift can only be made if the donor anticipates death. A gift causa mortis is known as the deathbed gift because it is the classic example of a gift being given by a donor at the time of death or on their deathbed.

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