Under Indian law, individuals are allowed to gift money, movable property, or immovable property to another person, including shares purchased from the stock market. According to reports from Livemint, previously the person making the gift was liable to pay tax under the provisions of the Gift Tax Act. However, after the abolition of the Act, no gift tax is payable by the sender under the Income Tax Act. The Income Tax Act also provides that capital gains arise when a capital asset is transferred, but Section 47 specifically excludes gifts from the definition of 'transfer', making the individual giving the gift exempt from paying tax.
Assets such as shares, Exchange-Traded Funds (ETFs), mutual funds, jewellery and similar instruments are classified as movable property. As reported by Livemint, if such assets are gifted without consideration and their Fair Market Value exceeds ₹50,000, the recipient is required to pay tax under Section 56(2) of the Income Tax Act. The value of the gift is treated as income and must be disclosed under 'Income from Other Sources' while filing Income Tax Returns, with tax levied according to the applicable income tax slab. However, gifts received from relatives including spouse, siblings, or lineal ascendants and descendants, on marriage occasions, or through inheritance are exempt from tax even for the recipient.
When gifted assets such as shares, ETFs, or mutual funds are sold, the gains are taxed under the head 'Capital Gains' and the taxpayer is required to file ITR-2. According to Livemint, the holding period is counted from the date the previous owner originally acquired the asset until the date it is sold, with the cost of acquisition being the purchase cost incurred by the previous owner. For capital gains calculation, taxpayers should maintain a gift deed or similar supporting documents to establish the legitimacy of the gifting transaction and avoid possible scrutiny from the Income Tax Department.
Capital Gains Tax is imposed on profits from selling or transferring capital assets, including real estate, equity stocks, mutual funds, and gold. As reported by Livemint, Long-Term Capital Gains (LTCG) apply after a holding period of 12 months for listed equity shares and equity-oriented mutual funds, while for unlisted shares, immovable properties, or gold, the required timeframe is more than 24 months. Short-Term Capital Gains (STCG) are classified when assets are sold before these timelines, meaning 12 months or less for listed equities and 24 months or less for other properties.
