How to gift stocks in India? 2023
Selecting thoughtful and budget-friendly gifts can be a challenge. Instead of traditional presents, consider the long-term benefits of stock gifting. Whether you're a parent or friend, adding affordable stocks to your gift can have a significant impact. Over time, these investments can grow and help your loved ones achieve their dreams, from buying a car to pursuing higher education. Stock gifting offers a valuable way to contribute to someone's future financial success. Let’s dive into the concept to know the complete insights of the gifting process.
What is Stock Gifting?
Stock gifting is a groundbreaking way to give presents. Zerodha, a pioneering brokerage platform, offers the unique opportunity to gift stocks and ETFs to your loved ones. This innovative concept encourages long-term investing by allowing the gifting of stocks, ETFs, mutual funds, and gold bonds. It's a great way to introduce children to investments and money management. It's worth noting that gifted stocks with capital gains will be transferred to the receiver's Demat account, meaning they will be responsible for paying taxes on any capital gains when selling the stocks in the future.
Requirements of Stock Gifting
To engage in stock gifting, certain prerequisites must be met.
Demat Accounts: Both the sender and the recipient are required to possess Demat accounts. If you don't have one, it's essential to open a Demat account.
Stock Eligibility: Senders must ensure that the stocks they intend to gift are eligible for this process.
Recipient Details: Collect essential recipient information, including their name, mobile number, and email address, which is needed for the gifting process.
Ensuring these requirements are met will facilitate the seamless exchange of gifted stocks.
How do you Gift Stocks?
Here's a comprehensive guide on how to gift stocks, with a focus on using the Zerodha platform:
Visit the Zerodha Gifting Page: Start by visiting the Zerodha gifting portal at console.zerodha.com/gift.
Complete the Gifting Form: On this portal, fill out the gifting form, providing the recipient's name, email, and mobile number.
Select Eligible Assets: Browse through the available stocks, ETFs, and gold bonds, and select the assets you wish to gift. Ensure these assets are pre-approved for gifting.
Await Recipient Acceptance: Once you've sent the stocks as a gift, patiently wait for the recipient to accept it within a 7-day window. If the recipient already has a Demat account with Zerodha, they can readily accept it. Otherwise, they will need to open a new account before accepting.
Verify Recipient's Identity: After the recipient accepts the gift, you will receive an email or SMS notification. You'll be required to verify the recipient's identity and confirm the stock transfer using your CDSL TPIN (Traded Password Information Number).
Initiate Off-Market Gift Transaction: Zerodha will then initiate off-market gift transactions at CDSL (Central Depository Services Limited). To cross-check and confirm this, you will need to enter an OTP sent to you by CDSL.
Confirmation at CDSL: Subsequently, on the same trading day or the next, at 5 PM, you will receive an email and SMS from CDSL. Confirm the off-market gift transaction by visiting www.cdslindia.com. Here, add your PAN or 16-digit Demat account ID and complete SMS OTP authentication before 8 PM on the same day.
Successful Transfer: Upon completion of these steps, the stocks are successfully transferred from your Demat account to the recipient's account. It may take up to 24 hours for the holdings to appear in the recipient's account.
This process ensures a seamless and secure transfer of gifted stocks through the Zerodha platform.
What is the cost associated with gifting stocks?
When gifting stocks, there is a standard off-market transfer fee applicable, which can either be ₹25 plus 18% GST or 0.03% per stock. This fee is automatically deducted from the sender's trading account.
Tax Implications of Stock Gifting
The tax implications of stock gifting are contingent on the value of the gifted shares. If the value of the gift exceeds ₹50,000, the recipient may be subject to tax implications. However, it's important to note that simultaneously gifting and selling stocks from your Demat account can result in penalties via an exchange auction.
Tax Implications for the Sender:
The sender is not liable to pay any gift tax as the Gift Tax Act (GTA) has been repealed.
Capital gains, which are taxable when transferring capital assets, do not apply to gifts. The term 'gift' is explicitly excluded from the definition of 'transfer' in Section 47 of the Income Tax Act. Therefore, the sender is exempt from income tax on the gifted shares.
Tax Implications for the Receiver:
According to Section 56(2) of the Income Tax Act, gifts of movable property, including shares, ETFs, mutual funds, jewelry, art, etc., which are given without consideration and have a fair market value exceeding ₹50,000, are subject to taxation in the hands of the recipient.
There are specific situations where gifting shares does not incur taxes, including when gifting to family members (spouse, siblings, and lineal ascendants or descendants) regardless of the value.
Gifts received during marriage or through inheritance are also exempt from taxation.
Understanding these tax implications is crucial when gifting stocks to ensure compliance with tax regulations and potential tax liabilities for the recipient.
Also read: Top Fintech Stocks in India 2023
Giving Stocks Offline as a Gift
In addition to the digital method, there's an offline approach for gifting stocks. You can transfer stocks that are held with NSDL or CDSL using this method.
Steps for Offline Stock Gifting:
Delivery Instruction Slip (DIS): To initiate the process, you'll need to fill out a Delivery Instruction Slip (DIS).
Required Information: The DIS form requires essential details for the stock transfer, including the ISIN number of the shares to be transferred, the company's name, the recipient's Demat account number, and their DP ID.
Submission at Broker's Office: Once the form is completed with the necessary information, you must visit the office of the old broker and submit the DIS form to proceed with the offline stock gift.
This offline method provides an alternative option for gifting stocks, offering flexibility in the gifting process.
The Bottom line
In conclusion, gifting stocks in India offers a unique and thoughtful way to secure the financial future of your loved ones. Whether you choose a digital method through brokerage platforms like Zerodha or opt for the offline approach, it's important to be aware of the tax implications and regulations governing such transactions. By gifting stocks, you not only share the joy of giving but also empower your recipients with the potential for long-term financial growth. This innovative way of gift-giving represents a bridge between the present and the future, where the gift of stocks can truly make a difference in the lives of those you care about. So, consider the gift of financial security and growth by exploring the world of stock gifting in India.
Follow us on Instagram.