How are stocks gifted to your spouse taxed?
2 min read 06 Aug 2023, 09:56 PM ISTAs spouse of an individual falls under the defined ‘relative’, there will not be any tax implications in your wife’s hands on account of receipt of shares as gift from you.
PremiumI want to gift my wife stocks worth ₹4 lakh. Who will bear the capital gains tax in that case?
—Akash Jain
Any gift of shares to a specified relative does not attract tax in the hands of recipient. As spouse of an individual falls under the defined ‘relative’, there will not be any tax implications in your wife’s hands on account of receipt of shares as gift from you.
However, since the shares are entirely funded by you, if your wife subsequently sells the gifted shares (resulting in capital gains or loss) or earns any dividend from the shares, clubbing provisions under the income tax law shall be attracted. Accordingly, any capital gains/ losses arising to your spouse from sale of the gifted shares will be clubbed in your income and taxable in your hands. The tax implications in your hands would continue to depend on factors such as period of holding, whether these are listed or unlisted shares, etc.
I bought a DDA flat in 1989. In the event of my death, my son will inherit it. If he decides to sell it, what will be the tax liabilities, including capital gain, on the proceeds received by way of a cheque. What are the options to save tax?
—Gurcharan
Any gain/ loss arising from sale of such inherited property by your son, shall be chargeable to tax as ‘capital gain/loss’ in his hands in the year of sale.
Where the property has been held for more than 24 months prior to sale, the same will be considered as a long-term capital asset and any gain / loss arising from its sale shall be considered as long-term capital gain/loss (LTCG/ LTCL). For calculating the period of holding of such inherited property, the tenure for which the property was held by you shall also be included.
LTCG will be calculated as the difference between the sale consideration and indexed cost of acquisition and improvement. Cost of acquisition in the hands of your son shall be the actual cost of the property in your hands as increased by any cost of improvement if any.
As the property has been acquired prior to 1 April 2001, the fair market value of the property as on 1 April 2001 or the original Cost of acquisition and improvement, as per option of taxpayer, shall be considered for the purpose of indexation and computing capital gains. LTCG is taxed at the rate of 20%, plus applicable surcharge and cess.
In case of LTCG from sale of residential property, the following exemptions may be availed by an individual taxpayer:
Under section 54 of the Act—by investing the LTCG in purchase or construction of a new residential house situated in India. Additional conditions related to period of investment, amount of investment, number of properties already held, sale of new asset, etc., need to be complied with.
Under section 54EC of the Act—By investing the LTCG in specified notified bonds (up to a maximum of ₹50 lakh). Additional conditions mentioned above needs to be complied with.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
