How are gifted shares taxed?

Income Tax Income from Other Sources
41

Shares gifted as gifts are generally subject to gift tax, not income tax. In most countries, the recipient does not initially pay income tax on gifted shares. However, if the shares generate income (such as dividends) or are subsequently sold, capital gains tax may apply based on their value at the time of the gift.

42

If Husband gift 30lakhs to wife and wife earned interest on it in her name.

  1. Tax on interest income pays by whom ?

and
Wife buys house from this 30lakhs and get rental income from house.
2. Tax on rental income is pays by whom?

and
Wife sells this house and get long term capital gains.
3. Tax on long term capital gains pays by whom?

Please clear the clubbing provisions on above scenarios.
Thanks

43

Shares given as gifts are subject to taxation according to the capital gains of the recipient upon sale. The donor’s original purchase price and holding period determine the profit. Gift tax might be applicable.

44

Hi Surbhi,

Even if the FMV of shares as on the date of transfer is below 50,000, the receiver is supposed to pay taxes?

45

Hey @Punit_T,

No, gifts of value below ₹50,000 are exempted from taxes.

46

Hi @Surbhi_Pal
Can you please carify in the below senario what the tax implications would be ?

Party A - To be father in law.
Party B - To be Daughter in law.

Party A, gifts party B some shares worth approximately 10lk for the event of her wedding.
Party B sells those shares immediately after, at 10.5lk approximately.
Cost of acquisition for party A was 3lk approximately.
Holding period was more than 1 year.

Q1. In the above senario what will be the tax liability for party A?
Q.2 what would be the tax liability for party B.

Note: Since clubbing provision could be applied, the shares are gifted for the purpose of the wedding 1 day before the actual event so as of the day of gifting the relationship of father-daughter in law is not in force. However, at the time of selling the relationship is there. Also, if the shares are sold before the relationship of father-daughter is in force would it impact the clubbing provision?

47

Hi Surbhi ji,

If I have received gifted shares of Rs 40,000 each from three friends of mine, would I still be taxed?

48

Yes, gifts from friends are taxable. You’ll have to report the value under other source income and pay tax on it as per the slab rate.

49

However, if the shares generate income (such as dividends) or are subsequently sold, capital gains tax may apply based on their value at the time of the gift.

50

Now zerodha says you can buy shares, mutual funds from minor account.

  1. So is it possible to buy shares directly from minor bank account? With out gifting shares?

  2. if its possible to buy shares from minor account by parent, how will the tax be calculated? Is invested amount taxed or only capital gains?

  3. as tax advisor please suggwsr which is better options to buy shares in minor demat account? a) gifting shares by parent or b) buying shares directly from minor demat account?

  4. if parent invests in minor demat account via MFs, shares, sgb and if it accumulates to an amount of 20 lakhs and with gaina become 40 lakhs . At age of 18 minor declares himself as major. Now will he be taxed for entire 40 lakhs or only gains of 20 lakhs at age 18?

  5. Do the minor has to declare amount os shares received every fiscal and file tax returns?

51

Hi @venkat_P,

Yes, they do have an update where one mutual fund investment can be made directly from a minor’s demat account. However, for stocks, they can’t be bought directly and can only be transferred as a gift.

The gains of ₹20L will be taxable.

More about tax implications on a minor’s demat account is written in this thread: What are the tax implications on minor’s demat account?

53

Hi Surabhi.

-Lets say I bought some shares on 10Oct 2023 ( last year).
-I transferred those shares to my father on 5thMay 2024, five months back

  • If my father sells those shares on 11Oct 2024, i.e 1 year after the initial purchase, would he have to pay the long term tax or short term tax?
  • Please confirm if I dont have to pay any tax.
54

Hi @Punit_T,

Hence, as the holding period exceeds 12 months, the gains will be long term.

Moreover, your father will have to pay the applicable taxes on these capital gains.