India, Aug. 8 -- While a brother can gift property to his sister with no tax liability for either party at the time of transfer since a sister qualifies as a 'relative' under the Income Tax Act, legal and tax experts note that if the sister later sells the property, the cost of acquisition for capital gains calculation will be the original price paid by the brother, not the market value on the gift date.

According to Deepak Kumar Jain, founder and CEO of TaxManager.in, gifts from certain specified relatives are exempt from tax under Section 56 of the Act. These include:

Spouse of the individualBrother or sister of the individual or their spousesBrother or sister of either parent of the individualAny lineal ascendant or descendant of the...