Gift of shares, equity MF, and debt MF to NRI son

Hi,

Firstly, gifts received from your father are tax free. You just need to report it in your income tax return (ITR). However, when you sale shares and mutual funds, it becomes taxable if it is hsoet term or STT in not paid. Generally, if you (including the holding of your father) hold equity shares and equity mutual funds for more than 1 year , it is tax free.

Coming to your specific questions

1. Donors cost will be treated as purchase cost (100 in your example) and donor's purchase date (1 Jan 2016 in your example) will be treated as purchase date for calculating short term or long term capital gain.

2. Sorry, I am not aware about US taxation.

3. There is no limit of gift in income tax. However, from FEMA perspective there could be some limit which our FEMA expert can tell you.

Please feel free to call/ revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Dear Sir,

There is no limit as such applicable for Gift. The Liberalised Remittance Scheme (LRS) is for general trasanction. with the RBI Permission obtained through AD Code Bank you can also gift any amount.

1) The cost to the donor will be the cost to the donee. Thus in your example, the cost of stock will be Rs. 100/- and LTCG will be Rs. 200/-.

2) You need to declare your assets in India and incomes earned in India in your tax returns. You can claim double taxation relief if you have paid any tax in India.

To the best of my knowledge, you need to pay taxes only when the stocks are sold and not on the basis of nominal value of unsold stocks. However, if you are declaring your stocks as business assets, as a dealer in stocks, the closing stock of your stocks may need to be valued at fair value, which is the market value and in such case, you end up showing profit in your books of accounts.

3) There is no limit on gift of your stocks. There is no loop hole as such, as there is a limit upto which you can invest in India as a Non Resident.

Hello,

1. For Capital gains the value shall be the value at which your father has purchased the stock i.e Rs.100 in your example.

2. US taxes totally depends on the state laws in which you reside. In most of the states investments in India are taxed on a year to year basis. Similar to Wealth Tax in India.

3. That is not a loophole as your investments are still in India. The money you think of liquefying them and repatriate them to the US, FEMA rules shall trigger.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Hi,

1. The donor's cost will be presumed to be your cost of acquisition, whenever you sell the shares / MF. Similarly, the period of holding will also be counted from the time the donor purchased it. In your example, the cost of acquisition as on 1 Jan 2016 will be Rs. 100. Sale consideration will be Rs. 300, as sold on 3 June 2017.

2. US Taxation varies with each state. You ought to refer to the laws of the state in which you reside.

3. There is no limit on the gift that you can receive from your parents / relatives. The investments continue to remain in India, and the limit of transfer to NRO account will be triggered only when you sell them and transfer the money to your bank account.

Trust this clarifies.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LLB