New rules and scrutiny around property gifts in India are turning what once seemed a simple tax workaround into a complex legal and financial decision, especially for owners with multiple homes considering transferring properties to relatives.
For Indian taxpayers who own more than two homes, the notional rent rule can turn an empty property into a tax problem. Income tax law generally allows only two houses to be treated as self-occupied, while any additional property can be deemed to produce rental income even if no rent is actually received. That is why some advisers suggest transferring a spare house to a close relative, such as a daughter, as a way of removing it from the owner’s taxable net, according to Zee Business and supporting guidance on property gifts in India.
Balwant Jain, a tax expert quoted by Zee Business, says a genuine gift to a daughter means the father no longer owns the house and therefore should not have to declare notional rent on it. That approach can work because gifts to specified relatives are generally exempt from income tax under the Indian tax code, a point also set out in reporting by The Times of India and The Economic Times. But the transfer must be properly documented and registered, and the broader tax position can still depend on how the property is used after the gift, including whether any income it generates is later subject to clubbing rules.
The tax treatment becomes more complicated if the daughter later sells the property. Jain said the gain is not calculated as if the asset had no cost at all; instead, the original purchase price of the father is generally carried forward for capital gains purposes. For older assets, where the original purchase was made before April 1, 2001, the fair market value on that date may be used in line with the rules. That matters because the capital gains regime changed for property transferred on or after July 23, 2024, with long-term gains now generally taxed at 12.5% without indexation, while resident individuals and Hindu undivided families may choose the older 20% indexed method where it gives a lower bill.
The wider message from tax advisers and recent reporting is that property gifts should not be treated as a quick workaround. While they can remove an extra home from the donor’s notional rent exposure, they also mean giving up ownership of a valuable asset, and the recipient may face tax or reporting issues later if the property produces income or is sold. Articles in The Times of India, Mint and The Economic Times all stress that gifts to close relatives may be exempt at the point of transfer, but they still require careful handling to stay within the law and avoid later disputes with the tax authorities.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
