How to give shares to relatives, what are the tax implications
In this method, a DIS (delivery instruction slip) must be filled in by the donor with the details of the shares to be offered, the donee’s account, etc. and delivered to its Depository Participant (DP). The DP will then transfer the shares. However, to receive the shares, the donee must submit a receipt instruction to their DP.
Some brokers offer to do the donation process online, using the e-DIS function. This does not involve any physical document submission. The donor needs to select the donation option and choose the company, number of shares and enter details such as the name and details of the donee and submit it for the donation. Now the donee must log in to their trading platform and accept it. The donor must then authorize the transfer on the CDSL platform using CDSL TPIN and OTP.
The relationship of the donor to the donee and the value of the gift are two factors that determine the taxation of a gift. In the event that the donation is made to close relatives registered under the Income Tax Act, it is not taxable, regardless of the value. However, a gift of more than Rs 50,000 to someone other than a relative is taxed in the hands of the donee.
Points to note
- It is best to consult a tax advisor as to the tax implications of the donation for the donee.
- There are no separate fees for donating shares in addition to the off-market transfer fee of Rs 25 or 0.03% of the share value.
(Content on this page courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta)