Demat account transfer/gift

This transaction of share transfer is not taxable in case - If mother is gifting share to their children .Tax implication arise in case if share are sold . Procedure is -

Transferring shares from a mother's demat account to her children's demat accounts involves several steps and considerations. Here's a general outline of how such a transfer might take place in India:

Gift Deed Preparation: If the transfer is treated as a gift, a gift deed may need to be prepared. This document should outline the details of the transfer, including the intent to gift the shares and the terms and conditions, if any.

Update Demat Accounts: Open demat accounts in the children's names if they don't already have them. Ensure all required documentation is submitted to the depository participant (DP) or broker.

Transfer Request: The mother (the donor) needs to submit a transfer request to her DP or broker, indicating the shares she wishes to transfer, along with the details of the recipients (her children) and their demat account numbers.

Gift Intention: Clearly indicate in the transfer request that the transfer is a gift to the children. Include any required documentation, such as the gift deed, as evidence of the intention.

DP's Verification: The DP will verify the transfer request and ensure that the documents are in order. They might also verify the authenticity of the gift deed, if applicable.

Transfer Process: Once the DP is satisfied with the documentation, they will initiate the transfer process. This involves changing the ownership details from the mother's name to the children's names in their respective demat accounts.

Stamp Duty: Some states in India require payment of stamp duty on gift deeds. Check if this applies to your situation and make the necessary payments.

Reporting: Ensure that all transfers are properly reported in the relevant tax forms and returns, such as the Income Tax Return (ITR) of the donor and the recipients.

Tax Planning: Given the potential tax implications, work with a tax advisor to plan the transfer in a way that minimizes tax liabilities for all parties involved.

Documentation: Keep all documentation related to the transfer, including transfer requests, gift deeds, and correspondence with the DP and tax authorities, for future reference and compliance purposes.

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Vaibhav RK

CA, Delhi

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Talk to Vaibhav RK

Gift by mother to son and daughter is exempt from tax in the hands of recipients. Execute proper gift deed and get it registered. In gift deed, clearly mention the name and number of shares gifted to each recipient. Retain all contract notes and summary for purchase of shares by your mother. At the time of sale of shares by son and daughter, cost and holding period of previous owner (mother) would be considered for calculation of capital gain.

What is the actual cost of the shares and source of funds for purchase of shares?

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Vivek Kumar Arora

CA, Delhi

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In respect to your queries you may please note the following:

Gift in Family, in your case from your mother to daughters is exempt from tax in the hands of recipients.

Please ensure that you execute a proper gift deed clearly mentioning all the details like name and number of shares gifted to each recipient. and get it registered.

Further please keep all the contract notes and summary for purchase of shares by your mother as at the time of sale of shares by the recipients the cost and holding period of previous owner (mother) would be considered for the purpose of capital gain.

Hope it helps.

Chhaya Rajput

CA, Noida

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Given the transfer of shares from your mother's demat account to a joint demat account with her daughters, it's important to navigate the tax implications effectively. Here's a comprehensive approach that combines the information from both alternatives:

Gift Tax Exemption: Gift from a mother to her daughters is generally exempt from tax under Indian tax laws. To ensure a proper process, follow these steps:

a. Gift Deed: Execute a detailed and well-drafted gift deed that clearly outlines the details of the gift, including the names and quantity of shares being gifted to each daughter.

b. Registration: Register the gift deed to make it legally valid and enforceable. Registration provides additional authenticity to the transaction.

Documentation and Recordkeeping: Maintain thorough records to support the transfer and any future transactions involving the gifted shares:

a. Contract Notes: Retain all contract notes and summaries that detail the purchase of shares by your mother. This will be essential to establish the cost and holding period of the shares when the recipients (daughters) eventually decide to sell them.

Capital Gains Consideration: When the daughters decide to sell the gifted shares in the future, the calculation of capital gains will take into account the cost and holding period of the shares as determined from the original owner (mother):

a. Cost and Holding Period: The cost of the shares for the daughters will be the original cost incurred by the mother, and the holding period will also be counted from the mother's acquisition date.

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Shubham Goyal