If profit by selling shares is > 1lac & < 2lacs, can we GIFT 50% shares to our family member(say brother) and claim LTCG benefit (of <1lac) from both accounts?
Ex: 1000 shares of Rs.100 bought on 1/4/19.
Now the share appreciated to Rs.250.
Profit will be 150000( 1000 x 250 = 250000 - 100000)
Can I GIFT 500 shares to my family member’s DMAT, sell shares. Now as profit will be 75000 each in two persons accounts and avoid tax.
My main doubt is Some blogs say Shares transferred off-market(without paying STT) attract 20% tax on Profit of sale. But didn’t explained them clearly.
LTCG is taxed at 10% in excess of INR 1 lac under Section 112A if STT is paid on buy and sell of such shares. If you gift equity shares to a relative, it is not considered as the transfer of a capital asset, and thus income tax is not applicable.
When the receiver of the gift will sell the shares, capital gains would arise.
To determine whether Capital Gain is LTCG or STCG, the holding period is calculated from the date of purchase of the previous owner to the date of sale. The cost of acquisition is the purchase price of the shares for the previous owner.
Therefore, you can claim the benefit of exemption of up to INR 1 lakh u/s 112A for both you and your relative.
@Quicko My father had transferred his shares to me back in 2018. Some stamp amount was paid for that transfer process. Rs 520. I had dematerialised the shares so they are in my Demat account now. If I ever sell the shares, how will the LTCG taxation be applied to me?
Transfer of shares from your father to you is considered a gift and is exempt in your hands.
On the sale of shares, Capital Gains would arise
If shares were held for more than 12 months from date of purchase of previous owner to date of sale, LTCG or else STCG
Purchase Date = Date of purchase of shares by the previous owner
Purchase Value = Purchase value of the previous owner
Tax Liability = 10% u/s 112A
But when I dematerialized the shares after transfer was done in paper format, HDFC Securities (prior to Zerodha I has account there) has set the purchase price as the IPO price at which it was bought by my father in 1998. The same is shown in Console too. Now?
The donor of the gift is not required to pay income tax and so the tax treatment in the hands of the recipient of the gift is based on the cost of acquisition and holding period of the previous owner. We have updated the same in the previous answer.