India, Aug. 28 -- A property gift between siblings may be a gesture of affection, but when it comes to real estate, the tax story doesn't end with the gift deed. A brother can gift property to his sister without an immediate income tax liability for either party, since siblings qualify as 'relatives' under Section 56(2)(x) of the Income Tax Act, 1961.

However, the tax implications come into play when the sister eventually sells the property. Under Section 49, the cost of acquisition for calculating capital gains is not the property's market value on the date of the gift. Instead, it is the original purchase price paid by the brother. The sister also inherits the brother's holding period for determining whether the gains are classified as...