My parents want to gift me shares of some companies they hold. How can they transfer the shares to me? What are the tax implications?
The procedure for transfer of shares in case these are held in physical form: Duly executed share transfer form needs to be sent to the relevant share registrar agent.
The procedure for transfer of shares in case these are held in electronic form or demat account: A delivery instruction has to be filled up and given by your parents to their depository participant.
From an income tax perspective, it is advisable to have a gift deed or a letter of gift evidencing voluntary gift of shares.
According to the provisions of section 47(iii) of Income Tax Act, 1961, transfer of shares by way of gift is not considered as transfer for the purpose of capital gain and, hence, there are no tax implications for your parents. Further, according to the provisions of section 56 (vii), the gift of shares received from your parents will not be liable to tax in your hands. However, when you sell, these may be subject to tax under the head of capital gains.
I, 62, received Rs 20 lakh from the sale of our ancestral land. Is this amount taxable in my hand? If yes, how? Are there any investment instruments that can help me save the tax? Also, is there any restriction on how to use this sum? More, I was planning to distribute this money among my daughters. Will they be taxed?
It is assumed the land did not belong to a Hindu Undivided Family. The taxability of the amount depends on whether the land was agricultural, as specified in the Income Tax Act. If it is, then the amount is not taxable. Otherwise, it is. If the taxable capital gain is invested in National Highways Authority of India or Rural Electrification Corporation tax-saving bonds, then it is tax-exempt. Exemption is also available if you purchase a residential house one year before or two years after the date of sale or construct a residential house within three years after the date of sale, subject to specified conditions.
Subject to the above discussion, if you distribute this amount among your daughters, they will not be taxed.
The writer is a tax partner at Deloitte, Haskins & Sells. The views expressed are his own. Send your queries to yourmoney@bsmail.in
