Property, Sale

Selling a property that was gifted to you, and what it counts as costing

The flat was gifted to you years ago, you paid nothing for it, and now you are selling it and cannot work out what your cost is supposed to be.

A parent or a relative gifted you the property, so you never paid a purchase price for it. Now you are selling, and the natural question is what cost you set against the sale, since zero would make almost the whole price taxable. There is also a nagging worry about whether receiving the gift was itself taxable, and whether the same value gets taxed twice. The law has a clear answer on all of it, and for a gifted property that has been in the family a long time the outcome is usually far better than you fear.

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Last reviewed: 26 July 20268 min readReviewed by Preetesh Maloo, CA

The short answer

When you sell a property that was gifted to you, your cost is not zero and not the gift-day value, it is the cost the donor originally paid (Section 49(1)), and your holding period includes the donor's, so a long-held family property is long-term in your hands (Section 2(42A)). If the donor bought it before 1 April 2001, you can use its 1 April 2001 fair-market value as the cost instead. Receiving the gift was tax-free if it came from a relative; if it came from a non-relative and was taxed on receipt under Section 56(2)(x), that taxed value becomes your cost (Section 49(4)), so the same value is never taxed twice. For an NRI the long-term gain is a flat 12.5% with no indexation.

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Related situations

Your cost is the donor's cost, not the gift value

A gift does not reset the cost to zero or to what the property was worth on the day it was gifted. The law carries the donor's cost across to you (Section 49(1)): whatever the person who gifted you the property originally paid for it becomes your cost of acquisition when you sell. So a flat a parent bought for a few lakh is treated as having cost you those few lakh, not nothing.

Where the donor acquired the property before 1 April 2001, you get the same relief any old owner would: you may substitute its fair-market value as on 1 April 2001, fixed by a registered valuer and capped at the stamp-duty value of that date, as the cost (Section 55). Because that 2001 value is far higher than an old purchase price, it is usually the figure that most reduces the gain on a long-held gifted property.

The donor's holding period counts, so the gain is long-term

For working out whether the gain is long-term or short-term, you do not start the clock on the day the gift was made. Your holding period includes the period the donor held the property (Section 2(42A)). So if a parent held the flat for fifteen years before gifting it to you last year, the property is long-term in your hands, not short-term.

That matters because long-term property gains for an NRI are taxed at the flat 12.5% rate with no indexation for sales on or after 23 July 2024 (Section 112), whereas a short-term gain would be taxed at your slab rate, which is usually much higher. The carried holding period is what keeps a recently-gifted but long-held family property on the lower long-term footing.

Receiving the gift, versus selling it, are two different events

People worry that the gift itself was taxed and will now be taxed again on sale. In most family cases it was not taxed at all: a gift of property from a relative, the defined list that covers parents, spouse, siblings and lineal ascendants and descendants, is exempt on receipt. A gift from a non-relative worth more than fifty thousand rupees is taxable on receipt under Section 56(2)(x).

Where the gift was taxed on receipt, the law makes sure it is not taxed twice: the value that was charged becomes your cost when you later sell (Section 49(4)), so only the appreciation after that is taxed as gain. So the two events are handled cleanly, a relative gift is tax-free on receipt and carries the donor's cost, and a taxed non-relative gift carries the taxed value as its cost. Either way the pre-gift value is not taxed a second time.

What's involved

What the CA actually does

1
We trace the donor's cost and date
We establish what the donor originally paid and when they acquired the property, from their deed or records, so the carried-over cost and holding period are on a firm footing.
2
We apply the 2001 value where it helps
Where the donor acquired the property before 1 April 2001, we arrange a registered valuer's 2001 fair-market value within the stamp-duty cap, which usually beats the old purchase price as the cost.
3
We confirm the receipt position
We check whether the gift was from a relative, and so tax-free on receipt, or from a non-relative and taxed under Section 56(2)(x), and where it was taxed we carry that value as the cost so nothing is double-counted.
4
We compute the gain and handle the TDS
We work the long-term gain at the NRI rate, file a Form 13 so the buyer withholds on the gain rather than the gross price, and carry it all into your return.

What to have ready

Documents you'll typically need

The gift deed
The donor's original purchase deed or record of what they paid
Proof of the relationship, if the gift was from a relative
Registered valuer's 1 April 2001 report, if the donor acquired before then

Your destination country can change the details

Requirements differ from one consulate, university and visa route to the next, how recent the figures must be, how long funds must have been held, and which certificates are mandatory. We assemble the documents around the exact checklist you're applying under. To see how India's tax treaty with your country of residence affects related filings, set your country below or compare all 46 countries.

References on this page

Section 49(1), cost of a gifted asset is the cost to the previous owner (the donor)
Section 2(42A), holding period includes the donor's period
Section 56(2)(x), gift from a non-relative over ₹50,000 taxable on receipt
Section 49(4), value taxed on receipt becomes the cost on later sale
Section 112, flat 12.5% long-term rate for NRIs, no indexation, post 23 Jul 2024

Frequently asked questions

Common questions

No. Your cost is what the donor originally paid for it (Section 49(1)), not zero and not the gift-day value. If the donor bought it before 1 April 2001, you can instead use its 1 April 2001 fair-market value, which is usually higher and reduces the gain further.

Not if the donor held it long-term. Your holding period includes the donor's period (Section 2(42A)), so a property a parent held for years before gifting it is long-term in your hands, taxed at the flat 12.5% NRI rate rather than at slab.

A gift from a relative, such as a parent or sibling, is tax-free on receipt. A gift from a non-relative over fifty thousand rupees is taxed on receipt under Section 56(2)(x), but in that case the taxed value becomes your cost on sale (Section 49(4)), so the same value is not taxed twice.

Yes, for the receipt side. A gift from a defined relative is exempt when received; a gift from anyone else over the threshold is taxable then. It does not change the cost rule on sale, which still carries the donor's cost, except that a taxed non-relative gift carries the taxed value as cost instead.

The exceptions that change the answer

Where the general rule stops applying to you

Every rule below has a carve-out, a cut-off date or a condition that flips the answer. These are the ones that decide real cases.

Long-term holding period: all other assets including immovable property

Right now: 24 months for ALL assets other than listed securities

Where it works differently

Unlisted shares transferred on or after 23 July 2024: 24 months, down from 36.; Finance (No. 2) Act 2024 rationalised every non-listed asset to 24 months.
The asset was inherited: The previous owner's holding period is added.; Explanation 1(b) to s.2(42A), read with s.49(1).
The transfer is a slump sale under s.50B: The 36-month long-term line is retained, not the 24 months that applies elsewhere.; s.50B was not rationalised by the Finance (No. 2) Act 2024, so the 36-month line survives there alone.

Commonly got wrong

Unlisted shares are long-term after 36 months. True only for transfers up to 22 July 2024. It is 24 months from 23 July 2024.State the transfer date, then the period.
Debt mutual funds become long-term after 36 months. Specified mutual funds bought on or after 1 April 2023 are always short-term under s.50AA, regardless of holding period.Specified mutual funds bought on or after 1 April 2023 are always short-term under s.50AA.

Taxable gift threshold under s.56(2)(x)

Right now: Rs 50,000 aggregate in a financial year

Where it works differently

The giver is a 'relative' as defined: No limit and no tax, whatever the amount.; Explanation to s.56(2)(x). The definition includes spouse, siblings, siblings of spouse, siblings of either parent, lineal ascendants and descendants, and their spouses.
The gift crosses Rs 50,000 from a non-relative: The WHOLE amount is taxable, not just the excess.; The threshold is a cliff, not an allowance.
Received on marriage, under a will, or by inheritance: Exempt regardless of amount or relationship.; Proviso to s.56(2)(x).
A resident gifts to a non-relative NRI: FEMA applies separately from tax. Satisfying s.56(2)(x) does not make it FEMA-compliant.; Two independent regimes: one under the Income-tax Act, one under FEMA.

Commonly got wrong

Only the amount above Rs 50,000 is taxed. The entire sum becomes taxable once the threshold is crossed.Cross Rs 50,000 and the whole gift is taxable.
A cousin is a relative. Cousins are NOT within the statutory definition.Relative means spouse, brother or sister, brother or sister of the spouse, brother or sister of either parent, any lineal ascendant or descendant of you or your spouse, and the spouse of any of these. Cousins are not on the list.

If this matched your situation, these go further

Selling an old Indian house with no cost documents or valuation report Selling a pre-2001 property, using the 2001 market value as your cost Selling a house you built yourself in India, and proving what it cost Form 13 lower-TDS certificate (property sale)Inherited Indian property tax NRI ITR filing (we file for you)Capital gains calculator Property sale TDS calculator