Gift
A voluntary transfer of movable or immovable property without consideration from a donor to a donee — usually irrevocable, and exempt from tax when received from specified relatives, on marriage or under a will.
In plain language
A gift is the simplest way to pass wealth to someone while you are still alive. The workbook defines it as a transfer of movable or immovable property made voluntarily and without consideration — nothing is paid or given in return.
The person giving is the donor; the person receiving is the donee.
In retirement and estate planning, gifts are one of the listed tools for transferring wealth. The workbook notes that they are routinely used to take advantage of exemptions from tax available on certain gifts received — which is why the relationship between donor and donee matters.
How it works
The three defining elements.
| Element | Meaning |
|---|---|
| Voluntary | Made of the donor's free will |
| Without consideration | Nothing is received in return — otherwise it is a sale or exchange |
| Transfer of property | Movable (money, securities, jewellery) or immovable (land, a house) |
Revocation. A gift is usually an irrevocable transfer. It can be revoked if the donee agrees to it. Once given, the donor cannot simply take it back on changing their mind.
Tax on gifts received. The workbook lists gifts that are exempt from tax:
- gifts from relatives — such as the spouse, siblings of self and of the spouse, parents, grandparents, children and grandchildren, among others
- any gift received on the occasion of marriage
- property inherited under a will
The workbook does not set out the tax treatment of gifts outside these categories, so an adviser checks that separately rather than assuming it.
Among the estate planning tools in Chapter 8, a gift sits alongside the will (effective only on death), nomination (simplifies payment on death), joint holding (gives access to a joint holder) and the trust (a standing arrangement for beneficiaries). The gift is the one that transfers ownership outright, now.
A worked example
Illustrative figures. Suresh, 68, has a retirement portfolio of Rs 2.4 crore — well above what he and his wife need. He wants to help his children now rather than leave everything in a will.
| Gift | Donee | Amount | Within the workbook's exempt list? |
|---|---|---|---|
| Mutual fund units | Daughter | Rs 25,00,000 | Yes — child |
| Cash for a home down payment | Son | Rs 20,00,000 | Yes — child |
| Fixed deposit | Granddaughter, on her marriage | Rs 5,00,000 | Yes — grandchild, and on marriage |
| Cash | His late friend's son | Rs 3,00,000 | Not in the listed categories — check the treatment separately |
Total given = 25,00,000 + 20,00,000 + 5,00,000 + 3,00,000 = Rs 53,00,000
Portfolio retained = 2,40,00,000 − 53,00,000 = Rs 1,87,00,000
The adviser's two cautions:
- Check the retained corpus first. A gift is usually irrevocable. If Suresh's Rs 1.87 crore later proves inadequate, he cannot take the Rs 25 lakh back from his daughter unless she agrees.
- Gifting is not a substitute for a will. The Rs 1.87 crore still needs one; without it, it passes under succession law.
Why NISM asks about it
Chapter 8, section 8.1.6 (Estate Planning), lists gifts among the tools for estate planning with the definition, the donor-donee terms, the revocation rule and the tax-exempt categories. Expect questions on what makes a transfer a gift (voluntary, without consideration), when it can be revoked (only with the donee's agreement), and which gifts received are exempt — relatives, marriage, inheritance under a will.
Common exam traps
- Without consideration. A transfer for payment, however small, is not a gift in the workbook's definition.
- Usually irrevocable — but revocable if the donee agrees. "Never revocable" and "revocable at the donor's option" are both wrong.
- Donor gives, donee receives. The same donor/donee words are used for a power of attorney with different meanings — the donor of a POA is the principal and the donee is the agent.
- The exemption is about who gives and why. Relatives, marriage and inheritance under a will are exempt; the workbook does not say that all gifts are exempt.
- A gift transfers ownership now; a will transfers on death. Property gifted is no longer part of the donor's estate to distribute.
Where this is taught
- Series X-B · Chapter 15: Tools for Estate Planningintroduced here
- Series XVII · Chapter 8: Special Considerations in Retirementintroduced here
Related terms
- NominationThe account holder's written direction naming who receives the securities on death — up to ten nominees for a demat account, with percentages that must total 100, mandatory for single holdings.
- Power of AttorneyA legal document by which you authorise somebody else — often your stock broker or depository participant — to operate your demat and bank account on your behalf. It is optional, and revocable.
- Estate planningDeciding during your lifetime who is to receive which of your assets after your death, and documenting it — mainly through a Will and nominations — so heirs can claim them easily and cheaply.
- TrustA legal arrangement in which property is transferred to trustees, who hold legal title and control it for identified beneficiaries on terms set out in a trust deed.
- WillA written legal declaration of how a person wants their assets distributed after death. Registration is not compulsory but preferable; without a Will, assets pass under personal laws.
- EstateEverything a person owns and owes at the time of death — real estate, investments, insurance policies, bank accounts and items of value — the pool that estate planning organises for distribution.
- Joint holdingProperty held by more than one person and accessed by them subject to the mode of operation, used as a simple way to let a spouse or child reach an asset without waiting for succession.