Property Gift to Spouse: It is acceptable for a wife to give her husband her apartment in accordance with Indian tax laws. Since presents given between couples are not considered taxable income for the recipient, there are no immediate tax ramifications. However, the pair needs to be aware of a “clubbing provision” that can cause issues down the road.

People can give gifts up to Rs 50,000 annually without paying taxes; any amount above this becomes taxable. However, income tax law allows spouses to transfer property freely. Unlike gifts from unrelated individuals, spousal transfers remain tax-exempt even if their value exceeds Rs 50,000 in a year.

What is Clubbing Effect in Taxation?

Media experts say the spouse does not pay taxes on any income from the gifted property, such as rental income or profits from its sale. Each year, the wife must include this income under her clubbing provisions. The law still applies even if the spouse sells the property and uses the proceeds for other purposes. Over time, tracking such conversions for taxation has become increasingly difficult.

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The husband can sell the property at any time. Tax authorities will consider the wife’s holding duration and initial purchase price to calculate taxes. Media reports say this determines whether the sale generates long-term or short-term capital gains. However, remember that the wife must include the capital gains from the sale in her income; the husband does not pay separate taxes.

The wife does not pay income tax on the gift itself, but the couple must pay registration fees and stamp duty. Certain states apply reduced rates for gifts exchanged between spouses.

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