Skip to main content

Gifting Shares

 

Transfer or Gift Shares in Demat Form

Are you holding shares and would like to gift it to your spouse or children or any other person? Yes!! Then read the article below explaining the:

  1. Procedure for gift or transfer of shares in demat form.
  2. Taxation on the Gift of Share.
  3. Taxation on income from the transferred share after the transaction.

Procedure to Gift Shares

Shares can be gifted both in demat form and physical form, but the procedure is bit different. Gifting of shares to another is legally termed as Transfer of Shares. Let us see how you (donor) can gift or transfer shares to a specific person (donee):-

Gifting Shares – In DEMAT Form:

Step 1: The Donor is required to initiate an off-market transaction by submitting a Delivery Instruction Slip (DIS) to his Depository Participant (DP) (in simple words DEMAT Account provider) for transferring shares from his (donor) demat account to the donee's demat account.

Step 2: The Delivery Instruction Slip (DIS) should have the following details:

  1. Name of the Donee
  2. Donee's Demat Account Details
  3. Share/Stock to be transferred
  4. ISIN Number of the Company
  5. Quantity of the Shares to be transferred

Gift or Transfer Shares in Demat Form

 

Step 3: On the other hand Donee is required to give a receipt instruction to his DP (DEMAT Account Provider) to accept these shares, if he has not already given a standing receipt instruction.

 

Step 4: It is advisable to execute a gift deed on a non-judicial stamp paper my mentioning the details of the transaction for legal records and to avoid any tax queries in future.

Download: Gift Deed Format

Gifting Shares – In Paper Form:

If the shares are in physical/paper/certificate form, a share transfer deed in Form 7B, filled and signed by the donor, needs to be executed and registered. The stamp duty is payable at the rate of 25 paisa for every Rs. 100 of the face value, or the market value of shares prevailing on the date of the document, whichever is higher. Once the transfer deed is registered, the share transfer is complete.

Points to Note:
  1. Details of DIS submitted by Donor and Receipt Instruction submitted by Donee must match; else the transfer will not be made.
  2. One should convert share certificate in demat form to avoid the stamp value.

Tax on the Gift or Transfer of Shares

Tax on gift is governed by Section 56 of the Income Tax Act, 1961. The tax liability is computed keeping in mind the receiver of the gift and amount of the gift. To get the better understanding of the Tax on the Gift of shares, let's divide the donee into two categories:

  1. Blood Relatives
  2. Others

Gift to Blood Relatives

In case the donee is a blood relative of the donor then the gift is completely exempt from tax irrespective of amount of the gift under section 56(2)(vii) of Income Tax Act, 1961.

Note: Section 56(2)(vii) defines Relatives means :

(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 descendent of the individual;
(f) Any lineal ascendant or descendent of the spouse of the individual;
(g) Spouse of the persons referred to in (b) to (f).​

The entire list of Relatives from whom Gift is Exempt from Tax is depicted below:

Gift Tax Relatives Charts

Gift to other person

If the donee is not a blood relative of the donor as stated above, then the gift in excess of Rs.50,000 is taxable in the hands of the donee. In case of shares the fair market value of the shares will be considered as the amount of gift and if exceeds Rs.50,000 in a year, than whole of such gift is taxable under the income from other sources in the hands of the donee.

Only on the occasion of marriage or any other such ceremonial occasions the gift in excess of Rs.50,000 would not be liable to income tax at all.

Tax on Income after the shares are gifted

Gifts to the spouse, daughter-in-law and minor children are exempt from tax but the income earned from such gifts will be clubbed with the income of the donor.

But if the gift is made to the dependent major children (above 18 years) the income earned from such gift will be taxed in the hands of the children not yours.

As for example: You have gifted 1000 shares of Reliance (Market Value 800) to your spouse. Since spouse comes under the definition of relative so there would be no tax on the gift, but the dividend received by the spouse after the transfer would be clubbed with your income and taxed accordingly. But if the same is gifted to major children the dividend income will be taxed in the hands of the children.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. IDFC Tax Advantage (ELSS) Fund

4. ICICI Prudential Long Term Equity Fund

5. Religare Tax Plan

6. Franklin India TaxShield

7. DSP BlackRock Tax Saver Fund

8. Birla Sun Life Tax Relief 96

9. Reliance Tax Saver (ELSS) Fund

10. HDFC TaxSaver

Invest Rs 1,50,000 and Save Tax under Section 80C. Get Good Returns by Investing in ELSS Mutual Funds Online

Invest in Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now