A gift may be in the form of money, immovable or movable property.
Assets like shares, bonds, ETFs, jewellery, and paintings fall under the category of movable property.
As per the Income Tax Act, the sender of the gift is not liable to pay any taxes. Instead, the receiver of the present is responsible for declaring and making the appropriate tax payments.
To calculate the tax liability, the receiver needs to declare the value of the gift at the time of filing the ITR under the Income from Other Sources (IFOS) head. The tax liability of the gift is then calculated according to their applicable tax slab.
When are gifted shares taxable?
Gifts received worth more than ₹50,000 in a particular financial year are taxable.
If shares are received without any consideration and the fair market value exceeds ₹50,000, then the entire value of the shares will be taxable as IFOS.
Cases when gifts are not taxable
- Value of gifts received is less than ₹50,000
- Gifts received from relatives (parents, spouse, siblings, in-laws, etc.)
- Gifts received on the occasion of marriage
- Gifts received by way of inheritance or under a will
In all of these cases, you will have to report this income under Schedule Exempt Income (EI) while filing the ITR.
Note that any income earned from investing the received gifts or assets is taxable. For example, receiving interest income from money transferred into your bank account, rental income from gifted property, or capital gains from sale of gifted shares are all subject to taxes.
What happens if you sell shares received as gift?
If you sell shares received as a gift at a profit, you will have capital gains and these would be taxable in your hands. In this case, you will have to file ITR 2.
To determine the holding period, date of acquisition by the previous owner will be considered.
In case of equity shares, if the holding period is more than 12 months, the gains will be classified as long-term and taxed at 10%, while a short-term capital gains (STCG) tax of 15% is applicable in case the holding period is less than 12 months.
Note: In case of shares received from parents/spouse, clubbing provisions may apply.