My son will be passing out from college next month. I want to gift him shares that I had invested in. Will this form of gift attract any tax?
Kshitij Goel, Bangalore
It is a nice gesture, which will go a long way in inculcating the habit of investing in shares into your son. Just make sure you document the transfer as gift detailing the transaction from the time of your purchase till you transfer the shares to your son to avoid any queries later on.
Normally, when an individual receives any property (other than immovable property), from any person during any financial year without consideration, the fair market value (FMV) of which exceeds Rs 50,000, then the entire FMV of such property shall be taxable under the head ‘income from other sources’. The FMV will have to be calculated as per the specified method prescribed in Rule 11UA of the Income tax Rules, 1962 (http://incometaxindia.gov.in/Rules/Income-Tax%20Rules/103120000000007268.htm).
There is an exception to this rule when such a property is received from a relative like siblings, uncles, aunts and even parents. As you are gifting these shares to your son, there will be no tax implications in his or your hands at the time of receiving and gifting the shares. As your son is over 18 years old, there will be no clubbing provision applicable, which means the dividend or capital gains arising from subsequent sale of shares by your son, will be taxed in his hands only and not yours.
