Tax on Gifting Shares From Mother to Son

Taxation
1

Dear Zerodha,

I am a mother, wishing to gift my only son stocks in my zerodha demat account.
I and my son, we both have Active Zerodha demat accounts.

I have read zerodha and quicko article about gifting and taxation.
It says I, the Sender of gift stocks will not be liable for any income tax implications.

My doubt :
My son will get the stocks from me, value well above Rs. 50,000/-
Will my son, as recipient, be liable to pay income tax on that gift?
What will be income tax implications for my son?

I REQUEST you to reply to my query as soon as possible.
Solving this doubt, coming from reliable source like you is very important to us.

Thank you.

1 Like
2

Hi Manjiri,

  1. No tax will be imposed on you and your son on your gifting and his receiving the shares.

  2. However, if your son wishes to sell those shares in the future, this income will be taxable under “Income from Capital gains”. Please read this article to learn more: Are there any income tax implications on the gifting of shares?

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3

How to calculate capital gains on shares received as gift.

as per above case

mother buy share @ 100 and at the time of gifting shares to son, price of share is 150.

son sell share @ 180.

what buy price should be consider to calculate capital gains 100 or 150 ?

4

Hello Kulsum,

Thank you so much for your quick response.

  • Follow-up questions, if you please :

  1. Will my son have to show stocks transfer as income while filling ITR?

  2. He will not have to pay ANY type of tax, say Capital Gains tax or show it as normal Income from other sources?

  3. I also have some mutual funds in zerodha.
    As far as I am updated in today’s world, MFs cannot be gifted or transferred, right?
    They can only be redeemed.
    Am I right to understand this or is there any way I can also transfer MFs to my son?

Appreciate your response.
Thank you.
Yours sincerely.

1 Like
6

@kulsum_khan : I would also like to know answer to this please.

7

Please allow me some time to revert on this.

8

Hi Manjiri,

  1. Gifts received from direct relatives are exempt from tax on transfers. It is better to have a gift deed created for high-value transfers.

  2. Capital Gains tax only applies when your son sells the stocks.

  3. Mutual funds can be transferred, but at Zerodha, our gifting feature currently does not support this transfer. However, you can use CDSL Easiest to transfer the Mutual fund units between demat accounts. You can refer to this article: How to transfer shares from the Zerodha account to other CDSL demat account using CDSL Easiest?

@Private This article from Quicko has detailed tax implication and calculation details: Tax on Gifted Shares & Securities - Learn by Quicko

Hope this helps. :slight_smile:

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9

Thank you Kulsum.

Now all my doubts are cleared.

Thank you truly.
Have a nice day.

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10

can such transferred mutual funds be redeemed at zerodha coin? I made mutual fund transfer from motilal to groww and groww doesn’t allow redemption of transferred mutual funds.

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11

Yes, such mutual funds can be redeemed on Coin. Here’s how you can do it: How to redeem or sell mutual fund investments on Coin web?

12

Hey @Manjiri_Erande,

Shares and securities received from a relative are exempt from income since a gift from a relative is exempt. As the relation is that of a mother and son, no tax will be imposed on the receiver of the gift while receiving the shares even if the amount exceeds Rs. 50,000. However, your son will have to report the income as exempt income under “income from other sources”.

Further, when your son wishes to sell such shares, the income will be considered as capital gain and tax will be levied on the same.

Hope this clarifies!

1 Like
13

@kulsum_khan - can the gift deed be unregistered? the stamp duty for high-value transfers can be a burden

14

It may not be mandatory to register a gift deed in this scenario (movable property) but, it is advisable to maintain proper records and documentation of the gift transaction, including a written gift deed. This can help clarify the transfer and intent.