Gifting a property to someone you care about? It might be your daughter, your younger brother, or even a lifelong friend. While the gesture may come from the heart, your mind might quietly whisper:
“Wait… will I have to pay tax on this?”
Welcome to The Donor’s Guide to Gifting Property — Tax-Free (Mostly)—your simple, no-nonsense walkthrough of what really happens when you, the donor, decide to gift an immovable property (like a flat, plot, or house) to someone.
Here’s the big reveal up front:
As a donor, gifting immovable property does not attract capital gains tax or income tax. That’s right—whether the gift is made to a relative or not, you’re usually in the clear.
But before you celebrate, there are some fine lines and legal obligations you still need to know. Because gifting property isn’t just handing over the keys—it’s also about paperwork, relationships, and tax logic.
Let’s decode that.
So, Is the Donor Taxed on Gifting Property?
Short answer: No.
Under Section 47(iii) of the Income Tax Act, any transfer of a capital asset by way of gift is not treated as a “transfer” at all for tax purposes. And if there’s no “transfer,” there’s no capital gain, and hence, no tax on the donor.
Whether you:
- Gift your house to your married daughter,
- Transfer land to your brother, or
- Gift a flat to a friend or trust,
You, the donor, won’t be taxed on the transfer. The giver doesn’t pay tax—even if the receiver might, in certain cases.
Then Who Gets Taxed? (Hint: It’s Not You… but Maybe Them)
So, now that we’ve established you, the generous donor, can breathe easy—let’s address the elephant in the recipient’s room.
While you’re not taxed, the person receiving your immovable property gift might be—depending on who they are.
Here’s the rule:
As per Section 56(2)(x) of the Income Tax Act, if a person receives immovable property as a gift without paying anything, and the stamp duty value exceeds ₹50,000, then it’s treated as “Income from Other Sources” in their hands.
But there’s an exception. A big one. And here comes the twist you need to know before transferring that prized plot to your childhood best friend.
The Official Income Tax Definition of “Relative”
Spoiler alert: The Income Tax Department has its own opinion about who counts as “family.”
If the gift is made to someone considered a “relative” under the Act, no tax is levied on the recipient, even if the property is worth ₹5 crore.
But if the person is not a “relative” as defined… even a ₹5 lakh flat could invite tax.
So, who exactly is a “relative”? Let’s decode that.
Relative (as per Income Tax Act) – For an Individual Donor, includes:
- Spouse of the individual
- Brother or sister of the individual
- Brother or sister of the spouse
- Brother or sister of either parent of the individual
- Any lineal ascendant or descendant of the individual
- Any lineal ascendant or descendant of the spouse
- Spouse of all of the above
Translation? Your brother-in-law’s cousin is not your relative (at least not to the Income Tax Department).
What Does That Mean for You?
Even though The Donor’s Guide to Gifting Property– says you don’t get taxed, your donee might end up with a surprise tax bill if they’re not a “relative.”
That’s not your headache—technically.
But if the gift was meant as a blessing, and ends up feeling like a burden to them, you may not win the “Best Gifter of the Year” award.
The Donor’s Checklist – What to Do, What Not to Do, and What to Double-Check
Okay, so you’ve made up your mind to gift a property. That’s generous. But generosity still needs documentation. And while the Income Tax Department may not tax you, they do expect you to play by the rules.
Here’s your donor’s survival kit—follow this, and you won’t lose sleep (or get tax notices):
What You Must Do as a Donor:
- Execute a Proper Gift Deed
- A gift of immovable property must be made via a registered gift deed under the Transfer of Property Act.
- It should clearly mention:
- The donor and donee’s full details
- Relationship (if any)
- Description and value of the property
- Intention to gift without consideration
- Register the Gift Deed
- The deed must be registered at the sub-registrar’s office, and applicable stamp duty paid.
- Each state has its own stamp duty rules. Many states offer concessions for gifts to relatives—so check locally.
- Mention It in ITR (Only If Necessary)
- While you don’t have to show the gift as income, you can mention it in your capital account or notes—especially for large-value transactions.
- It helps if you’re ever asked about your asset disposal later.
- Keep Proof of Relationship (If Gifted to Relative)
- This could be:
- PAN cards showing father’s name
- Birth certificates
- Marriage certificate (to prove spousal family ties)
- Not needed for ITR filing, but helpful during scrutiny or audits.
- This could be:
- Retain Copies of All Docs
- Gift deed, PAN of donee, property papers, proof of possession transfer—keep everything in a file.
- Because one day, someone will ask.
What You Should Not Do:
- Don’t Gift Without a Registered Deed
- Oral gifts are a no-go for immovable property. No matter how close the relationship, without a registered deed, it’s invalid in law.
- Don’t “Disguise” a Sale as a Gift
- If there’s hidden consideration (payment behind the scenes), it’s not a gift. It’s a sale. And that can attract capital gains tax—and penalties if detected.
- Don’t Assume All Family is “Relative” per Income Tax Act
- “Cousin sister”, “Mama’s son”, or “Rakhi brother” may be family to you—but if they’re not in the official list, your donee might get taxed.
- Don’t Forget Clubbing Provisions (in special cases)
- If you gift a property to your spouse or minor child, any income earned from that property in future may be clubbed back to you.
- This doesn’t change your taxability at the time of gift, but can impact future income from that asset.
What to Double-Check Before Gifting:
- Is the donee a relative as per the Income Tax Act?
- Is the property in your name with clear title?
- Is there any loan or mortgage on the property?
- Have you calculated stamp duty correctly?
- Will this gift impact your future capital gains exemption (like under 54, 54F)?
Final Word from The Donor’s Guide to Gifting Property—Tax-Free (Mostly):
“Gifting property is noble. But nobility without paperwork is just a tax query waiting to happen.“
When in Doubt, Gift with Clarity
Gifting immovacble property isn’t just a noble gesture—it’s a legally binding act that comes with paperwork, implications, and often, misunderstandings.
From a tax point of view, you, the donor, are mostly unaffected—but only when things are done the right way.
In this blog, we decoded the rules under The Donor’s Guide to Gifting Property—Tax-Free (Mostly), and we hope it helped bring clarity to your generous plans.
That said, the specifics—like who qualifies as a relative, how to register a gift deed, or whether clubbing provisions apply—can get tricky based on facts.
Need a second opinion or help drafting your property gift deed?
Reach out to us, and let an expert walk you through it—properly, legally, and peacefully.
Because sometimes, even a gift needs a little professional wrapping.
FAQs – Real Questions from Real People (Maybe Even You)
Can I gift a house to my daughter-in-law? Will I be taxed?
No, you won’t be taxed as the donor. However, your daughter-in-law is not a “relative” as per the Income Tax Act. So she may be taxed on the stamp duty value of the house—unless it’s routed via your son.
I gifted property to my wife. Is future rent income also tax-free?
Ah, not quite. While the gift itself isn’t taxed, any income (like rent) earned from that property will be clubbed back with your income under Section 64. It’s the Income Tax Act’s way of saying, “Nice try.”
Read Clubbing of Income to know more!
Do I have to report the gift in my ITR?
As a donor, not necessarily—especially since it’s not taxable. But if it’s a large transaction, it’s wise to mention it in the Capital Account or as a note in your computation. Transparency never hurts.
Can I gift property under ₹50,000 to a non-relative to avoid tax?
Yes, technically, if the stamp duty value of the property is below ₹50,000, the donee won’t be taxed, even if not a relative. But be cautious—splitting one property into parts to bypass this rule may be questioned.
Is oral gifting ever valid for property?
No. Not for immovable property. The law requires a registered gift deed for the gift to be legally recognized.
I gifted a property to my brother 10 years ago. He’s now selling it. Will I be liable for capital gains tax?
No. Once you gifted it, the asset legally belonged to your brother. He now bears the capital gains tax responsibility upon sale. However, for cost of acquisition, the indexed cost from your original purchase will be considered.
I own a property jointly with my spouse. Can I gift my share only?
Yes, you can gift only your share, as long as it’s clearly defined. The donee will become joint owner with your spouse. However, if you gift your share to someone not a relative of your spouse, legal and taxation complications may arise.
I gifted a property to my daughter. She’s a minor. Is there anything special I should do?
Yes! Since minors cannot legally own property outright, the gift will be held by her guardian (likely you or your spouse) until she turns 18. Any income from the property (e.g., rent) will be clubbed with your income until then.
I am gifting agricultural land. Does the same gift rule apply?
Yes, gifting rules under Section 47(iii) apply to all immovable property, including agricultural land—whether rural or urban. But be cautious—state laws may differ in registration/stamp duty, especially if the land is reserved or ceiling-bound.
I’m gifting property to a trust or NGO. Is it exempt too?
From your side as the donor, yes—still exempt under Section 47(iii). But the donee trust may face tax if it’s not registered under Section 12A/12AB of the Income Tax Act. Always ensure the recipient is legally compliant, or your good deed could attract unintended issues.