By Neelanjit Das

Copyright indiatimes

When a parent gifts their property to a son, daughter, son-in-law or daughter-in-law, the transaction isn’t subject to income tax in the hands of the recipient under Section 56(2)(x) of the Income Tax Act, 1961. This is because such gift transactions fall within the definition of gifts from “relatives.” However, how the income from that property is treated can differ based on who receives it.Income Tax GuideIncome Tax Slabs FY 2025-26Income Tax Calculator 2025New Income Tax Bill 2025Chartered Accountant (Dr.) Suresh Surana says that where the house property is gifted to a son or daughter, any rental income accruing thereafter is generally taxable directly in their hands as the legal owners.Also read | ITR Filing 2025 Last Date Live Updates On the flip side, if the property is transferred without consideration to a spouse or to a son’s wife (daughter-in-law), the clubbing provisions under Section 64(1)(iv) and 64(1)(vi) can apply, and the transferor (the original owner) can be considered as the deemed owner for income-tax purposes. In such cases, if there is any rental income from that property the rental income is taxed in the transferrer’s (original owner’s) hands rather than the transferee (new owners). Surana says that such clubbing provisions may also apply in case of gift to minor son or minor daughter under Section 64(1A) where such transfer is for inadequate consideration.Additionally, when the gifted property is sold later, the tax liability falls on the recipient. Surana explains that according to Section 49(1), the acquisition is deemed to be the cost at which the parent who originally acquired the property and under Explanation 1(i)(b) to Section 2(42A), the holding period of the parent is also included for determining the nature of the capital asset. Thus, the recipient calculates capital gains based on the parent’s original purchase price (including indexation where eligible) and the combined holding period . Similar to above, in cases where property is transferred without adequate consideration i.e. as a gift, the clubbing provisions may also apply to those capital gains.Also read: Husband bought property for Rs 60 lakh jointly with wife; Income tax dept sent her notice for unexplained investments; she wins case in ITAT DelhiTax treatment of immovable property received as gift by an individual or HUF According to the Income Tax Department brochure, if the following conditions are satisfied then immovable property received without consideration by an individual or HUF will be charged to tax: Immovable property, being land or building or both, is received by an individual/HUF. The immovable property is a capital asset within the meaning of section 2(14) for such an individual or HUF. The stamp duty value of such immovable property received without consideration exceeds Rs 50,000.Also read: Even if you made zero capital gains income from sale of property you still need to pay tax in this situation; CA explains whyWhen is an immovable property received by an individual or HUF by way of gift not taxed?In following cases, gift of immovable property will not be charged to tax:i) Property received from relatives.Relative for this purpose means:a. Spouse of the individual; b. Brother or sister of the individual; c. Brother or sister of the spouse of the individual; d. Brother or sister of either of the parents of the individual; e. Any lineal ascendant or descendent of the individual; f. Any lineal ascendant or descendent of the spouse of the individual; g. Spouse of the persons referred to in (b) to (f).Also read: He got Rs 89 lakh as gift from relatives; Tax dept doubted its genuineness, but ITAT Mumbai ruled in his favour: Here’s whyii. In case of HUF, any member thereof.● Property received on the occasion of the marriage of the individual. ● Property received under will/ by way of inheritance. ● Property received in contemplation of death of the donor. ● Property received from a local authority [as defined in Explanation to section 10(20) of the Income-tax Act]. ● Property received from any fund, foundation, university, other educational institution, hospital or other medical institution, any trust or institution referred to in section 10(23C) [w.e.f. AY 2023-24, this exemption is not available if property is received bya specified person referred to in section 13(3)]. ● Property received from a trust or institution registered under section 12AA or section 12AB [w.e.f. AY 2023-24, this exemption is not available if property is received by a specified person referred to in section 13(3)]. ● Property received by any fund /trust/university/other educational institutions/hospital/other medical institution referred to in section 10(23C)(iv)/(v)/(vi)/(via)(Applicable if Property is received on or after 1st April 2017) ● Property received by way of transaction not regarded as transfer under clause (viiac)/(viiad)/(viiae)/(viiaf) of section 47. 10) Property received from an individual by a trust created or established solely for the benefit of a relative of the individual.Also read: Property and assets gifted to son’s wife: Will the income from it be clubbed to your income for tax purposes?Marriage of individual is the only occasion when gift received by him will not be charged to tax Gift (i.e. immovable property received without consideration) received only on the occasion of marriage of the individual is not charged to tax. Apart from marriage there is no other occasion when a gift received by an individual is not chargeable to tax. Hence, immovable property received on occasions like birthday, anniversary, etc., without any consideration will be charged to tax.Also read: No income tax for gifts received by individuals in these seven situations Taxability of immovable property received without consideration i.e., gift from friends Gifts (i.e. immovable property received without consideration) received from relatives are not charged to tax (meaning of relative has been discussed earlier). A friend is not a relative as defined in the above list and hence, gifts received from friends will be charged to tax (if other criteria of taxing gifts are satisfied).Also read: Income Tax Department finds Rs 5 crore cash in his house; Know how a 2008 circular saved him from prosecution Illustration 1An Individual received a gift of flat from his friend. The stamp duty value of the flat is Rs. 8,40,000. In this case whether the total value of gifted property will be charged to tax or only the value in excess of Rs 50,000 will be charged to tax? If the conditions discussed in the earlier part (regarding the taxability of gift of immovable property) are satisfied, then the entire stamp duty value of immovable property received without consideration, i.e., received as gift will be charged to tax. Once the taxability is attracted, I.e., stamp duty value of property received as gift exceeds Rs 50,000, then the entire stamp duty value of the property is chargeable to tax. Hence, in this case the entire stamp duty value of property, i.e., Rs 8,40,000 will be charged to tax.Also read: She sold her house for Rs 2.7 crore to buy seven new flats and paid no income tax, wins case in ITAT Delhi; Know howIllustration 2On 1-5-2025, Mr. Kumar gifted his house to his friend Mr. Raja. The market value of the building was Rs 8,40,000 and the value of the building adopted by the Stamp Valuation Authority for charging stamp duty was Rs. 9,00,000. Advice Mr. Raja regarding the tax treatment in this case. If the following conditions are satisfied then immovable property received by an individual or HUF will be charged to tax: Immovable property, being land or building or both, is received by an individual/HUF. The immovable property is a „capital asset‟ within the meaning of section 2(14) for such an individual or HUF. The stamp duty value of such immovable property received without consideration exceeds Rs 50,000.The above provisions are not applicable in case of immovable property received from relatives and immovable property received on certain specified occasions.Also read: Father sells house worth Rs 67 lakh and shows only Rs 1,690 income in ITR, wins case in ITAT Ahmedabad; Know how In the given case, the property is a capital asset for Mr. Raja, the property is received from his friend (friend is not covered in the definition of relative), property is not received on any specified occasions and the stamp duty value of the property exceeds Rs. 50,000. In other words, all the conditions required to tax the gift are satisfied and hence the stamp duty value of the property i.e. Rs. 9,00,000 will be charged to tax in the hands of Mr. Raja. It will be charged to tax under the head “Income from other sources”.Also read: Husband has to pay income tax for wife’s Rs 17-crore land sale deal due to this reason; ITAT Bangalore ruling explainedTaxability in a case where an immovable property is received for less than its stamp duty value Apart from taxing immovable property received without consideration, i.e., received as gift, the Income-tax Act, 1961 has also designed provisions for taxing immovable property received for less than its stamp duty value. If following conditions are satisfied, then immovable property received by an individual or HUF for less than its stamp duty value will be charged to tax: Any immovable property is acquired by an individual or a HUF.The immovable property is a „capital asset‟ within the meaning of section 2(14) of the Act for such individual or HUF. Such property is acquired for a consideration but the consideration is less than the stamp duty value and the difference exceeds higher of Rs 50,000 and 5% of the consideration.Also read: Father receives Rs 4 lakh as cash gift in son’s marriage and wins income tax case of unexplained income; ITAT Ahmedabad ruling explainedNote: The Finance Act, 2020 has increase the safe harbor limit of 5% to 10% w.e.f. Assessment Year 2021-22