Hey, I bought 10 stocks of ‘X’ at the average price of 100. Then, I gifted this to my sister when the price of the stock was 150. Now the stock is around 200.
In my P&L Tax, 500 which is (150-100)*10 is shown as profit which will be taxed. But shouldn’t all the tax over the gain be taxed at my sis end and not from me?
This also happened to me. When I gifted stocks to my mom, they were all in profit. However, when I transferred these stocks to my Mom’s account, the P&L statement in my Zerodha account was showing as a profit but in fact I never realized any profits.
I personally marked all the stocks which I gifted and then discusses with CA(with quicko) and did not pay any taxes on the gifted stocks. However you need to adjust the purchase value on the giftee side. This is because when you gift them, the purchase price for the giftee will be the current price of the stock on the day you gifted.
Hi @krritik
As per the Income Tax provisions for gifting of shares, the profit/gains from the sale of shares are taxable in the hands of the receiver.
Hence, your understanding is correct, it should be taxable in the hands of your sister when she sells those shares, she received as a gift from you. For the purpose of calculating LTCG/STCG, it is important to consider the period of holding and the price of shares to the previous owner.
In case the broker statement still shows the profits in your Tax P&L as the broker is not intimated for the gift of shares or any other reason, you can ignore the same at the time of filing of return.
So, how did you separate out the stocks which you gifted and the rest for which you have to pay tax while filing the ITR? Since the document from Zerodha contains all the stocks and no distinction.
Also, how did you update the purchase price on the giftee side?
Thanks in advance.
In that case, documents by the Zerodha won’t be valid. What other documents can I show that these are the gifted stocks? Also, how will I distinguish these from rest of the stocks?
I know which stocks I gifted. So I marked them manually. There is no special distinction between Sold stocks and gited stocks. All gifted stocks will be shown as sold.
You need to raise a request with the Zerodha team to do this. You have to tell them that you want to update the purchase price of the stocks that are received as gift. But this is quite laborious because then you need to enter all the “Buy” transaction from the gift-er. I think when you have your P&L and then you can provide this as proof to your sister and then discuss with CA to compute the gains in the future.
If need be Govt. can cross verify this as they have access to the Demat statements. You also see these transactions in your AIS statements.
Hi @krritik
Here’s How to gift securities? on Zerodha.
At Zerodha, for tracking and reporting purposes, the stock’s closing price on the day the stock gets transferred is the exit price for the person gifting the stock, and the same price is used as an entry price for the person receiving the gift. The average price is updated within 3 working days after the stocks are transferred. While filing for income tax, a different view can be taken on the acquisition price.
Having a gift deed can help the sender and receiver as it can serve as proof of the gift transaction. In cases of scrutiny, you can use this document to justify the genuineness of the gift transaction.
So, for the giftee (your sister), when she sells these shares, she should take the purchase price as it was to you while filing her ITR. When you file your ITR, you can ignore those transactions that were gifted, in case it is incorrectly reflected in your Zerodha report.
As rightly mentioned by @Z-User you will be able to see the transactions in your AIS.
Hope this helps.
My understanding of this is different from what is stated above. From the article posted, it says “ * Purchase Value – The value of the purchase of the previous owner i.e. sender of the gift”.
This interpretation makes sense to me. Let’s take an example:
Gifter:
Bought XYZ stock at 100
Gifted stock to giftee, with current value at 200
Giftee:
Per quote above:
purchase price is 200
If sold at 201, then tax is only paid for (201-200)=1
The govt loses tax on the appreciation from 100 to 200. Which they won’t do.
Per the article:
Purchase price is 100
If sold at 201, tax applies to (201-100)=101.
Govt is happy.
CA’s and tax experts may correct my understanding, if incorrect.
This interpretation is correct.
Thanks a lot for the help! I understood it.
Okay, I missed how this is calculated in Zerodha. Thanks for the help. I will do the same while filing the ITR.
Gifts receeived on 2nd hindu marriage
Are tax free ?
Gifts received on 2nd muslim marriage
Are tax free ?
@Quicko how does it matter to the senders of the gift? do they need to file the transfer in their ITR while there is no income from these stocks.
Hey @satpalpundeer,
There are no tax implications on the sender and hence, there’s no need to report in the ITR.
Example : I am giving money to my friend/relative for applying under Small Hni (2L) and they go allotted and now it’s in profit 50k
Hi @Tinkle
Income tax is chargeable to the assessee on whose demat the transaction was done.
In this case, if your friend sells the shares on exchange, he needs to pay 20% on STCG i.e (10K - 20% of 50K Profit).
Now, if he transfers the shares to your demat instead of selling them, there will be no tax impact for now since CG is levied when you sell the shares and not when the shares are transferred from one account to another.
You need to pay tax when you sell the shares and you can claim the cost of acquisition as 2 lakhs from the sales price since you paid the same.
Also, note that there is no tax on lending of money, but if you charge interest on the same, it has to be treated as income and tax needs to be paid on the same.
Hope, this helps.
Let’s say I lend , no interest no tax , but when he return the money as shares also no tax
Now he returns the 2L shares with gain of 50k, Just say for this scenario , for both of us who and how much ig friend doesnt need to pay
So if i lend money for ipo and it gets allotted and 2L changes to 2.5L and he will pay STCG but when he returns to me he will give me 2.4L right after paying 10k stcg , so when he returns captial + profit shuld i also pay tax?