Are there any income tax implications on the gifting of shares?

Are there any income tax implications on the gifting of shares?

  1. For the sender:
  • Not liable to pay taxes on the gift itself as the Gift Tax Act has been abolished.
  • Capital gains from transferring a capital asset are generally taxable, but gifts are excluded from this definition under Section 47 of the Income Tax Act.
  • Therefore, the sender isn't liable to pay income tax on the transaction.

  2. For the receiver:

  • Liable to be taxed under Section 56(2) of the Income Tax Act for gifts of movable property exceeding ₹50,000 in value, without consideration.

Income from such gifts should be reported under "Income from Other Sources" in the Income Tax Return, and tax should be paid at the applicable slab rates.

Related facts:

  • If the gifted asset is sold, whether it's shares, ETFs, or mutual funds, the tax you pay depends on how long you hold it.
  • If you sold it within a short period (usually less than 3 years), you pay tax at your normal tax rate.
  • If you held it for longer, you might pay less tax, or even none, depending on the rules.
  • You report these gains on Form ITR-2 when filing your income tax return.
  • Keep records of what the asset cost when you got it and any costs you had when selling it.
  •  This helps in accurately calculating your gains for tax purposes.