Tax on gifted shares, gold and property

Income Tax
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Who doesn’t love receiving gifts, right? Whether it’s your birthday, your wedding day, or any festival, receiving a thoughtful present is always a great experience. But, here’s the catch – along with that shiny gift wrap, there can be some tax-related strings attached.

As per the IT Act, any gift in the form of cash, cheque, movable, or immovable property is taxable in the hands of the receiver.

Which gifts are taxable and who pays the tax?

Any sum of money or an immovable asset like a house or land received is a gift. Gifts also include movable assets like shares, jewellery, art pieces, and more. Any of these gifts received will be taxable if their monetary value exceeds ₹50,000. The gifts are taxable only in the hands of the receiver and not the sender.

What if you receive gifts from your spouse or parents?

When you receive gifts from relatives like parents, siblings, or spouse, it will not be taxed irrespective of the amount of gift received. A friend is not included in the definition of a relative You can read more on who all are relatives as per the IT Act, here.

:bulb:Gift received on the occasion of marriage, death & inheritance is not charged to tax.

Let’s take a few situations with different types of gifts received and their taxation.

:chart_with_upwards_trend: When you receive shares and securities as a gift

Gifting appreciating assets like shares and securities has become very common recently. When you receive shares as a gift, there are two transactions,

1. When you receive the shares(transfer of ownership),

If the monetary value (FMV) of shares & securities is more than INR 50,000, such gift is an IFOS income and taxed at slab rates. It’ll be exempt if received from a relative.

2. When you sell the shares,

Capital Gains tax would arise on the sale of shares. The holding period will be calculated from the date when the previous owner(sender of the gift) purchased the shares. In the case of equity shares, if the shares are held for more than 12 months, long-term capital gains will arise. If the shares are sold before 12 months, there will be short-term capital gains. Read more on how capital gains will be taxed, here!

:coin: When you receive gold as a gift

Gifting gold still remains an integral part of Indian culture. If you receive gold from non-relatives, it’ll be taxable. Same as in the case of shares, if the FMV is more than ₹50,000 then tax will be levied at a slab rate.

Later, when the gold is sold, the capital gains will be taxable. If the gold is held for less than 3 years, there will be short-term gains. If the gold is held for more than 3 years, there will be long-term gains.

In the case of immovable property like land, or property, as a gift, the taxation is similar to taxation on gold as a gift.

How to report such gifts in the ITR?

The gift received is reported under the head “Income From Other Sources”. If the gift received is not taxable, it will be reported under the exempt income head.

Read about more on Tax on Gifted Shares & Securities - Learn by Quicko

Have Doubts? Ask away!

1 Like
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“reliance” share current market price on the NSE exchange is Rs.2427/ =
but . i sell the 100 shares in “off-market transfer” to my friend at a discount price of Rs.2000/=
OR
if i sell the 100 shares in “off-market transfer” to my friend at a premium price of Rs.3000/=

what is the tax implication of the above transaction to my friend and to me ?

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Hi @HIREiN

The taxation aspect remains the same even in case of an “off-market transfer” of shares.
Just like any other transaction, the taxes on the off-market trading generally depend upon the period for which they are held.

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so . it does not affect the buyer or seller whether the offline-transaction happened at a premium price or at a discount price ?

but , then , this is a loophole in the system !

one might sell the shares in offline at a discount price (of the current online market price) to save the tax and settle the discounted money in cash (black money) !

is this so ? or am i missing something ?
@Shrutika_Shah

5

Hey @HIREiN,

For Off-market transactions, since the transfer of shares is not via recognized exchanges without payment of STT they are chargeable to tax at higher rates.

Long-term capital gains are taxed at 20% and STCG at slab rates even for listed shares.

These transactions are tracked in the AIS of the taxpayer as well.

Hope this helps!

6

how much ?
20% or slab rate ; whichever higher !

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Hi @HIREiN

For LTCG it is 20% and STCG at slab rate.
LTCG is taxed at 10% for listed shares above ₹1,00,000 and STCG at 15%.

1 Like
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Hi @Shrutika_Shah @TeamQuicko

I am planning to gift shares via offline transfer to my spouse using cdsl easiest portal . Experts pls answer the below:
1)This is a transferred without consideration. Correct ?
2)is a gift deed required for such transactions as it’s fully digitised now and trackable ?
3)what is income that has to be reported by my spouse while filing. Is it depending on the market price as on transaction date of gift transfer OR the aquisation price by me OR FMV on transaction date ?
4) what is the “reason for trade” given in cdsl easiest. Is it “gifting” OR “transfer to specified member in family” ?
5)On selling , what has to be reported by my spouse as entire ltcg will be clubbed with mine ?
6)Is it possible for her to pay full tax on ltcg here as percentage tax is same whoever pays ?
7)How is FMV calculated for listed stocks bought after 2020 ?

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Hi @Rag

Here are the answers to your various questions.

  1. Since its gifting of shares to a relative (spouse) as per the income tax act, it is without or inadequate consideration.
  2. For legal purposes, and in the event of an income tax-related inquiry, it is recommended that donors of gifts execute a gift deed on legal stamp paper when a transfer of shares is undertaken.
  3. Income/Loss arises when there is a sale of shares. Your spouse will be required to report such a sale while filing an ITR where the purchase price of shares shall be the cost to the previous owner and the gains/loss shall be taxable in the hands of the receiver.
  4. You can select “Transfer to specified member in family” inorder to avoid stamp duty charges.
  5. On the sale of those gifted shares, the clubbing provisions apply if your spouse does not have any taxable income
  6. In case of LTCG from the sale of shares, the income shall be clubbed with your income and hence you will be required to pay tax.
  7. The FMV shall be the closing price of the shares as on the date you require the FMV.

Hope this helps!

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@Shrutika_Shah . Thank you for the replies… Some confusions . Kindly correct me pls.
1)If gifting with no consideration - Then There is no stamp duty to pay here.
2)Point noted regarding gift deed.
3)Post gifting, before selling of shares, is there anything that needs to be reported while my spouse files ITR ?
Also you mentioned about purchase price . But what about purchase date ?
4)For transactions without consideration - “Gift” should be selected ?
5)Does clubbing provision apply if there is no other income for her, but is an IT assessee.
6)IF clubbing provisions apply, No tax required to by receiver here as Entire LTCG is taxed for me. In this case, what is reported as income/gain/loss by my spouse w.r.t the selling of shares ?
7)FMV is same as market value w.r.t. shares ?

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if forgot to select this option by mistake and stamp duty paid ; how can i claim refund of the stam duty later on ?

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Hi @Rag

Here are answers to your various queries,

  1. Yes, this is because you have already paid the stamp duty when you originally purchased the shares. So when you gift, which is without/inadequate consideration, you need not pay again.
  2. Alright, if the gift deed is clarified.
  3. She will be required to show the same as gift income under Income From Other Sources. But this shall be exempt as it is received from a relative as per the Income Tax Act.
  4. Yes, you may select gift. Because a gift is done without/inadequate consideration.
  5. Yes, clubbing provisions apply, if there is no other income.
  6. If clubbing provisions apply, then the entire income is taxable as LTCG/STCG in your hands, not your spouse’s hands. The income shall be reported as STCG/STCL/LTCG/LTCL depending upon the period of holding.
  7. Yes, FMV is the fair market value of the shares as of the particular date.

For any further queries, you can book a MEET where you will be able to connect with our tax experts and clear all your doubts.

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Hi @HIREiN,

You can book a MEET where you will be able to connect with our tax experts and clear all your doubts.

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That was so much helpful @Shrutika_Shah . I will certainly need to book a MEET when I do the filing in coming months.
The theory is more clearer now, thank you for that.
When we say Income on Gifted shares means::

  • Does it mean Dividends only, while holding ?
    AND
    -On selling its the entire sale proceeds or just the Gains are treated as income ?
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Hi @Rag

Glad the information was helpful to you.
Income from gifted shares means:

  1. While holding, dividend income which will be taxed under Income from Other Sources
  2. At the time of selling, the entire gain/loss (net consideration) shall be taxable under Income from Capital Gains.
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Hi,

I recently received shares via transmission on death of my grandfather. The value of shares is a lot higher than my yearly income. How to show these shares in my income tax return? I know that there is no inheritance tax, but If I sell them, it will be shown on AIS (Annual Information Statement) too, so there would be chances of a query, so to avoid that, is there any way I could declare this while filing my ITR itself?

How are situations like these handled usually? I know gifts from relative is shown in ITR and is an exempt income, but not sure about trasmission/inherited shares

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Hi @tarun

Shares received as a gift (including inherited) from relatives are exempt from the hands of the receiver on the transfer of shares.
When you sell those shares, then it shall be taxable to you. Here, you can take the cost of acquisition of those shares as it was to the previous owner and pay tax on the balance amount. The gain/loss shall be visible in your AIS.

When you file your ITR, you must disclose only the income from capital gains when you sell those shares. Your holdings need not be declared in your ITR.

Hope this helps.

18

Hi
I am a full time trader and investor with no salaried income. For the past 3 years, I have been reporting all my STCG and LTCG as business income since I can claim all eligible expenses and pay tax according to the tax slab of 30%. I received some shares from my father long time back as gift which I sold them recently. Should this profit be added to my business income and tax paid according to the tax slab 30%? Or should I consider this as LTCG and just pay 10% of profit (above 1Lak) as tax? My doubt is whether this specific gift profit can be treated NOT as business gains but as capital gains so that just 10% LTCG tax can be paid on it (rather than 30% tax slab). Thanks in advance.

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Hi @M_Sridhar

If you’re trading into FnO & intraday, only then you’re required to report them under business income and hence file ITR 3. The tax is calculated depending on the regime chosen and the applicable slab rate.

The shares received as a gift from your father and your selling them will be taxable under the head of Income from Capital Gains separately. The tax will be payable on the amount of gain, which is the difference between the cost of acquisition (that will be the price your father paid for the purchase of shares) and the selling price.
The rate of tax will be LTCG at 10% after considering the 1 lakh exemption.

Hope this helps.

1 Like
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But I have already been reporting all of FnO, intraday, STCG, LTCG under business income as it is my only source. Hence 30% tax on all of the above income minus trading expenses (setting off of losses is done as per rules).
In my case, since I have been reporting LTCG as business income for the past 3 years, shouldn’t I continue reporting LTCG from gifted shares also under business income?