Tax on gift

Gifts to relatives are not taxable under any circumstances under the income tax act or any act for that matter( Since gift tax was removed). Even that gifting of cash for repayment of mortgage is not taxable. 

If the same transaction is with a person other than a relative (which is not the case with you),then gifted amount in excess of 50,000 is taxable @ 30% flat. 

But if any income is derived from that property, it will be clubbed in your hands as it is a transfer for inadequate consideration.

@ Siva Palla is Daughter in Law covered under the definition of relative?

And should there be any gift deed to prove the transfer or the deed which shows mortgage has been paid is enough?

Yes daughter in law is well covered as a relative. All linear ascendants or descendants and their spouses are relatives as well. 

If you want to transfer the property, there should be a gift deed because your daughter in law will be needing it at the time of selling the same(if she wants to sell so). But as far as Income tax is concerned, you needn't prove anything as to transfer since you are not availing any exemption or deduction on the condition of transfer.

Gift to daughter in law is not taxable. But, any income arising out of the  property gifted to daughter in law by father in law is taxable in the hands of the father in law u/s 64.

Gift to daughter in law is not taxable. But, any income arising out of the  property gifted to daughter in law by father in law is taxable in the hands of the father in law u/s 64.

Prepare a gift deed in favor of the daughter-in-law duly stamped and registered. If the property is mortgaged, and you will pay off the mortgage by giving the amount to daughter-in-law, then that too will have to be documented.

If a sale deed is drawn up and amount is received correspondingly, it is a sale consideration. If just the money is given, it is just a gift of money and not sale.