A gift is a transfer of movable or immovable property from one to another without consideration. Shares owned by a person can be gifted to another person (relative or otherwise) by following a certain procedure. Since gifting constitutes a transfer, and the transfer is for no consideration, such a transfer can be carried out using the "off market transfer" mechanism.
Delivery instruction slip (DIS)
Donor of shares has to fill out a DIS and submit the same to Depository Participant (DP). It should mention the DP ID, DP name, client ID of the donee and name, ISIN, and number of shares to be transferred.Execution date must be mentioned. This is an instruction to the DP.
Receipt instruction
The donee has to fill out a receipt instruction and submit it to his DP. The shares received from the donor's DP will be credited to donee's DP account once the receipt Instruction is received. Details such as DP ID, name, needs to be mentioned.
Process
Once the DIS or receipt instructions are received, duplicate copy is returned to respective parties. Details mentioned in delivery instruction and receipt instruction must match. Transfer takes place on execution date mentioned by the parties.
Need for deed
Since shares are considered "movable property", it is not mandatory to execute a gift deed. However, in order to create a legal record, it is best to execute a gift deed on an appropriate stamp paper.
Tax
If the gift of shares is being made to a "relative" as defined by the Income Tax Act, it will not be subject to tax. Also if the value of shares is less than `50,000, the same is not taxable in the hands of the donee, even if he is not a "relative" as per the Act.
Once a gift is made to the donee, it is not revocable.
If the buying client has given a standing receipt instruction, this may be ignored.
If the shares are in physical certificate form, a share transfer deed will have to be executed and sent to the registrar of the company.
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