How are gifted shares taxed?

Income Tax Income from Other Sources
1

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

  1. Value of gifts received is less than ₹50,000
  2. Gifts received from relatives (parents, spouse, siblings, in-laws, etc.)
  3. Gifts received on the occasion of marriage
  4. 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.

:bulb: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 gift for profit, the capital gains would be taxable in your hands. In this case, you will have to file ITR 2.

To determine the holding period, the previous owner’s date of acquisition will be considered.

Remember, profits from equity shares held for more than 12 months are classified as long-term and taxed at 10%, while those held for less than 12 months are considered short-term capital gains (STCG) and taxed at 15%.

:bulb:As per the Union Budget 2024, shares sold on or after 23rd July 2024 will attract LTCG tax at 12.5% and STCG tax at 20%.

Note: In case of shares received from parents/spouse, clubbing provisions may apply.

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2

@Keshav_Bansal you told that if we receive shares as gifts from our parents or spouse then the clubbing provision may apply. But clubbing of income provision comes under the “transfer of assets” and as “gifts” are not considered as “transfer”. Then how clubbing provision will apply?

3

Hey @Walker,

Transferring assets without adequate consideration is considered a gift. Hence, clubbing provisions may apply when you gift shares to minor child or spouse.

Hope this helps.

4

Could you please clarify below queries. It will be very helpful to make some decisions.

I have invested in mutual funds and bonds. I did collateral of them and doing trading.

  1. I got LIQUIDBEES as a gift from my mother-in-law. If I sell them, will the capital gain applies to me or would it be clubbed to me and my mother-in-law?
  2. What happens after I purchase mutual funds with the same amount after selling the LIQUIDBEES. If I sell the MF after 1 year, will the long term capital gain still attracts to clubbing or only will the gains applicable to me?
  3. Similar as mother-in-law, what happens if my brother-in-law gift the capital assets to me? Will applies the same rules as mother-in-law?
5

Hey @Sreekar,

With regard to your query,

  1. Clubbing provisions apply in the case of the daughter-in-law, however, in the case of son in law, the gift amount will be exempt and there’s no provision for clubbing.

  2. The gains will be taxable in your hands as long-term capital gains.

  3. In case of a gift from brother-in-law, the gift will be exempt and no clubbing provisions shall apply.

Hope this helps!

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6

I have two queries. First, your platform suggests that buy price and buy date will be considered as of the previous buyer. However, the zerodha customer executive denies it and maintain that day of gifting shares will will je considered. Please clarfy. Second, in case of gifting shares at zerodha platform, will zerodha automatically count the holding perriod.

7

Hey @Sharad_Ranjan,

The date on which the previous owner(transferor of gift) had purchased the shares is taken as the date of acquisition to calculate the holding period.

With regards to the second query, kindly get in touch with the broker as they will be able to assist in the same.

Hope this helps!

8

mam 3 queires

  1. what is the cost of gifted shares for the receiver while calculating capital gain liablity

  2. if husband t/f shares to wife is it taxable even when the wife doesnt sell those shares

  3. for gifting shares to wife, does it require and legal documentation or agreement ?

many thanks

9

Hey @deepak2508,

With regard to your queries,

  1. The cost of acquisition and holding period is calculated based on the previous owner, that is, the transferor or the gift.

  2. Gifts from relatives are not taxable and the husband is covered under the definition of relatives. Hence, the gifted shares from the husband will not be taxable. However, when you sell such shares, capital gains tax needs to be paid.

  3. There’s no such legal documentation required.

Hope this helps!

10

thanks mam for the reply

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11

Based on this example

Sender is not liable for any income tax. Does this also means that there would be no capital gains applicable for the sender?

As per example,
Rajiv purchased 2000 shares at INR 100 of ABC Ltd on 15/02/2020. He gifted 1000 shares to his mother, Shweta on 01/09/2020. FMV on 01/09/2020 was INR 200 per share. Shweta sold out these shares on 02/03/2021 at INR 400.

In this case, there will be no tax liability for Rajiv. Further, upon receiving the gift, Shweta is not required to pay anything. However, at the time of selling the shares, she must pay capital gains, which will be calculated as follows:

This means that the only taxable payable is by Shweta as following
buy 1000@100 on 15/02/2020
sell 1000@400 on 02/03/2021
LTCG on 1000*(400-100)
This means that the transfer date (01/09/2020) doesn’t come into picture at all.

Is this the correct way?

From what I have gathered, in case of gifts via Zerodha, it ends up calculating capital gains for the Rajiv and it will also update the price for Shweta as following

For Rajiv,
Buy 2000@100 on 15/02/2020
Gift 1000 with FMV on 01/09/2020

so STCG: 1000* 100 => 1,00,000

For Shweta,
buy 1000@200 on 01/02/2020
Sell 1000@400 on 15/03/2020

STCG for Shweta on 1000*(400-200)

This is obviously incorrect. Plz correct me if I am wrong

12

Hey @Prikshit,

Yes, in the case of gifted shares, the holding period as well as the cost of acquisition is considered based on when and at what cost the previous owner (sender of gift) had purchased the shares.

There’s no tax liability for the sender of gift.

Hope this clarifies.

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13

Thanks for the confirmation @Surbhi_Pal

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14

I have been holding stocks since 3 years in sole owner dmat account. Now I would like to transfer INR 10Lakh worth stocks including gains to my brother. As per gift definition will he qualify under family member so that this transaction does not go under transfer and we get gift exceptions. This is correct? Just wondering as this amount is higher than INR 50,000.

15

Hey @Jadeja_Bhagirath,

Yes, the gift amount will be exempted from taxes. However, your brother needs to report the amount in his ITR under ‘exempt income’.

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16

Thanks for answering my question. Do we need to prepare any document for gift transaction such as gift deed or any other documents. As my brother reports in his ITR, would he receive any query from IT?

17

Hey @Jadeja_Bhagirath,

If the income is reported correctly, the ITD does not issue a notice. If in case the source of income is questioned, as you will be transferring the shares online, the same shall serve as proof.

18

if the wife has no other source of income and she sells 5 lacs worth of gifted shares (gifted by husband) in a FY then who is liable to pay the taxes??

19

Hey @MAYANK_MOHAN,

When the gifted shares are sold, clubbing provisions shall apply and hence, you will be liable to pay taxes on the capital gains that arise from such shares.

1 Like
20

if i receive shares as gift > 50k from other then the family and i don’t want to sell them in that condition do i need to pay tax on it or i will only pay tax on it only if i sell.