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Gifting shares is a thoughtful and financially valuable way to share wealth with family or friends. Instead of cash or physical gifts, you can transfer your ownership of listed shares directly to a loved one’s Demat account. This method not only promotes financial awareness and investment culture but also allows your loved ones to potentially benefit from long-term market growth.
Gifting shares involves transferring ownership of shares from your Demat account to the recipient’s Demat account without monetary consideration.
Key points to note:
It is considered a gift under the Income Tax Act if no payment is involved.
The transfer is done electronically via your Depository Participant (DP) linked to NSDL or CDSL.
It can be an efficient way of wealth transfer without the need for physical paperwork in most cases.
The process of gifting shares is simple but requires accuracy to ensure smooth transfer:
Ensure the recipient has a Demat account: Shares can only be gifted electronically.
Submit a Delivery Instruction Slip (DIS): Your DP will provide a form to transfer shares to another account.
Fill in recipient details: Include Demat account number, DP ID, ISIN of the shares, and quantity.
Execute a Gift Deed: This is not mandatory for electronic transfer but is recommended for legal clarity, especially for high-value gifts.
Check the status of the transfer: Once approved, shares move to the recipient’s Demat account and ownership is officially transferred.
While gifting shares can be financially beneficial, it comes with tax considerations:
For the Giver (Donor):
There is no gift tax applicable in India for the person gifting shares.
For the Recipient (Donee):
Gifts from relatives (as defined under the Income Tax Act) are fully exempt from tax.
Gifts from non-relatives could be taxable if the aggregate value goes beyond ₹50,000 in a financial year.
Future capital gains will be taxed when the recipient sells the shares.
Understanding the advantages of gifting shares can help you make an informed decision:
Wealth Transfer: Helps move investments to younger family members.
Tax Efficiency: Gifts to relatives are tax-free, reducing the burden of wealth transfer.
Promotes Financial Literacy: Encourages recipients to learn about stock markets.
Long-Term Growth Potential: The gifted shares can appreciate in value over time, adding to the recipient’s wealth.
Gifting shares requires careful handling to avoid errors or legal issues:
Ensure recipient details in the DIS form are accurate.
Execute a gift deed for high-value transfers to document ownership change.
Confirm the Demat account type (individual, minor, or joint) before initiating the transfer.
Be aware of capital gains liability if the recipient decides to sell the shares later.
Here is an example to understand the process clearly:
You own 100 shares of XYZ Ltd., each trading at ₹500.
You decide to gift all 100 shares to your sister.
You fill the DIS slip, mention her Demat account details, and submit it to your DP.
After processing, the shares reflect in her Demat account, and the ownership is transferred.
Below is a summary of tax implications when gifting shares to relatives and non-relatives:
| Recipient Type | Gift Tax Applicability | Capital Gains Tax Applicability |
|---|---|---|
Relative |
No |
On future sale only |
Non-Relative (<₹50,000) |
No |
On future sale only |
Non-Relative (>₹50,000) |
Yes (Recipient) |
On future sale only |
Understanding tax rules based on the recipient type helps in planning share gifts efficiently.
Gifting shares is a unique and financially meaningful gesture that allows your loved ones to benefit from equity market growth. By following the correct Demat transfer procedure and understanding the tax implications, you can ensure a smooth, compliant, and rewarding experience for both the giver and the recipient.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
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