Gift of property to relative

Following persons fall in the definition of relative under section 56

relative" means,—

[i] in case of an individual—

[A] spouse of the individual;

[B] brother or sister of the individual;

[C] brother or sister of the spouse of the individual;

[D] brother or sister of either of the parents of the individual;

[E] any lineal ascendant or descendant of the individual;

[F] any lineal ascendant or descendant of the spouse of the individual;

[G] spouse of the person referred to in items [B] to [F]; and

If Y- receipient falls in any of above then no tax on transfer of Property. And after transfer of this gifted property, the rent income will be taxed in the hands of 'Y"

1. In your case, "Y" will be covered under the definition of relative as per point (vii) of explanation to the relative. 
2. So for the purpose of above transaction Y will be considered as relative and the transfer will not attract any income tax as per sec 56(2)(x). 
3. Now, as per sec 64 clubbing of income covers only spouse and children. It cannot be stretched to Y in this case. So, rental income from the property will be clubbed in the hands of Y as IHP. 
Please correct me if the above solution has an alternative view. 

If father gifts a property to his daughter (A lineal descedent) in whose hands the rental income is taxed?
Especially so if the daughter is earning and the father is retired..

@ Ram Bhat
Once father gifts a property to daughter, father loses all rights in the property.

Daughter becomes the legal owner and rental income will be taxed in her hands.

1. If the property is gifted to a daughter it will belong to the daughter and any income arising out of such property will be taxed in the hands of the daughter. 
Please correct me if the above solution has an alternative view.