I have a query regarding gifting shares. I have gone through few posts here & Quicko article on this but I have not received a clear picture.
A mother & her son (major) are both separate Zerodha account holders. Mother owns shares in her demat account that she held for more than 10 years. She wants to gift all those shares to her adult son. I have researched that such a transfer will not attract any income tax liability to either of them except for a nominal off-market transfer fee. My query is as follows.
Lets say the son sells the shares within a year of the gift transfer, say, in 6 months.
The capital gain would be LTCG since the original purchase date would be considered. Is this correct?
The LTCG will be taxable in the hands of the son & Clubbing Provisions of IT Sec 64 (or 60 or 61) would NOT come into play. Is this correct?
As a mother is covered under the definition of relatives in the Income Tax Act, any gift received would be exempted in your hands. Moreover, with regard to your queries:
For the calculation of the holding period, the original date of purchase would be considered.
Clubbing is applicable in the case of a minor child. Hence, here, clubbing provisions shall not apply.
Yeah I don’t understand why there is no simple answer to this. So much confusion. Hundreds of same question in this forum. Maybe quicko can create a video for their youtube channel explaining this.
Simple question:
I gift shares/ETF units to mother/wife/son/daughter.
They sell it (next day itself) out of their own knowledge/reasons/fear.
Income is under their tax slab or mine? I know acquisition cost/date are same but who has to pay taxes on this sale.
Clubbing provisions are applicable when shares are gifted to spouse, minor child or daughter-in-law. If the child is major (above 18 years of age) or you’re gifting shares to your parents, clubbing will not be applicable.
Whenever clubbing as applicable, the income shall be clubbed into the hands of the sender of the gift and they will be liable to pay taxes on it.
@Quicko
Hello
My father has gifted me shares which he acquired back in 1981. i received the gift on FY 24-25.
The cost of acquisition is unknown as the shares were in physical format and just dematerialized last year. What are the tax implications when I see these shares? Can I use the FMV on 31.02.2018 as purchase price? please guide me on the same.
Thank you for the response @tallerballer ,the stock is ambujacem.
But I do have one more query though, as I can see in some of the articles on google that if the stock was purchased before 2001 . I have to take the FMV as on 1st April 2001.
Any views on that?
However, the cost of acquisition of equity shares and mutual funds will be calculated differently if it was bought before January 31, 2018. This is because there is a concept of ‘grandfathering clause’ at play here. Under this clause, if any equity shares or mutual funds are bought before January 31, 2018, then the acquisition price would be taken as the price on January 31, 2018, even if the said share or mutual funds were purchased much earlier.
Yes it states the same ! I understood.
Although I have another query/concern which is , how does the IT dept know that the shares are gifted and it is supposed to be LTCG and I have to take the FMV on 2018. How do I specify that during filing. I mean normally if in case of quicko , it just fetches the data from broking account right? Could you provide some insights on this?
When someone gifts you shares, you have to manually add buy price and buy date in Zerodha. So in your zerodha account it will be like you bought it on same day as the person who gifted you, at his price or the price on 2018 FMV, whichever is higher.
So when you import into Quicko, Quicko also sees it as you bought it X years ago at Y price.
This is applicable only if you use CDSL transfer, not Zerodha gift feature.
In CDSL when transferring, you have to clearly mention whom you are transferring to, since taxation is different if you gift it to non-family
Thank you , I understood! I was rather curious about how the IT dept could know when the shares were bought as it was dematerialized from physical ones. Also , what if I just randomly put the price as say 500 and pay capital gains on it. I am just curious about what happens in the backend of IT , like is there a tracker or something that they deploy to know these?
If you are dematerialising them from paper, it does not matter what price you bought it at since 99% , if you are going to convert the physical share certificate to the electronic form, it means price has increased since only then will you put the effort.
So automatically buy price is whatever price it was in 2018. Does not matter original buying price.
The when part is irrelevant. Buying date does not matter > 1 year, since tax is same if you bought it in 2017 or 1957. Buy price is all that matters for tax purposes.
Understood. but regarding the actual cost price , there has been many splits that occured after the initial purchase , the last split being in the year 2005. This has increased the no. of shares obviously, does this in any way affect in considering the FMV as on 2018 as cost of acquisition for the entire no. of shares I have now?
Understood. I was just asking how does the IT dept know what cost I am putting , like rather than putting the FMV as on 2018 what if I just put 500 rs a random higher number and sell the shares and file for LTCG. I understand the question seems absurd, but just curious about the working intricacies of the system. It would be great if you could share your insights on this
(Only if you’re willing to disclose the name)