How are gifted shares taxed?

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 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.

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@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?

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.

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?

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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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.

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!

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

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!

thanks mam for the reply

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