As we strive to express our affection for loved ones in thoughtful ways, the notion of gifting shares or bonds presents a unique and enduring gesture. Beyond traditional presents, offering shares or bonds to our loved ones symbolises a lasting investment in their future prosperity.
Through the convenience of a demat account, one can seamlessly transfer ownership of these financial assets, fostering a connection that transcends material possessions.
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For instance, grandparents may opt to pass down a legacy to their grandchildren by gifting their shares of a company with sentimental value, instilling in them the importance of long-term investing. Additionally, close friends may express their support and camaraderie by gifting each other shares of a promising startup, nurturing their mutual aspirations for financial success.
In this article, we will explore the process of gifting shares and understand its significance for both the giver and the recipient.
Also Read: Demat Account: 10 crucial things beginners should keep in mind
Understanding the process of gifting shares
Gifting shares from one demat account to another involves two types of processes, such as off-market trades or transfers, or it can also be done online.
Off-market transfers operate similarly to standard transactions, with the seller and buyer engaging directly. The process begins with the gifting party submitting a delivery instruction slip (DIS) to their depository participant (DP), authorising the transfer of securities from their demat account to the recipient's account.
In the DIS slip, the gifting party must specify the recipient's DP ID, DP name, and client ID, along with details such as the ISIN (International Securities Identification Number) of the shares being transferred.
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It's important to note that the gift of shares is tax-exempt under the provision of Section 56(2)(x) of the Income Tax Act, as it falls under the category of 'property received from a relative.'
Once the necessary transfer formalities are completed, the gift becomes irrevocable. After the shares appear in the recipient's DP account, they have the freedom to manage them as they see fit, whether it involves selling them or passing them on as another gift.
Is a gift deed mandatory for share transfers?
Shares are classified as "movable property" under the Income Tax Act, 1961. While it's not obligatory to execute a gift deed for transferring shares, doing so can establish a legal record documenting the transfer.
Online transfer of shares
In addition to off-market transfers, brokerage firms facilitate clients gifting shares directly from their demat accounts. This process involves simply entering the recipient's details.
Upon initiating the transfer, the broker sends an email and SMS notification to the recipient, prompting them to accept the gift within 7 days. However, the stocks remain in the demat account during this period.
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Once the recipient accepts the gift, the system sends an email and SMS notification to the sender, requesting confirmation of the recipient's identity and the transfer of stocks.
FAQs
How can shares or bonds be gifted through a demat account?
Shares or bonds can be seamlessly transferred from one demat account to another using off-market trades or through online platforms provided by brokerage firms.
What are the tax implications of gifting shares?
The tax implications hinge on the value of the stocks gifted. If the value of the gift exceeds ₹50,000, the recipient may incur tax implications.
Is a gift deed mandatory for transferring shares?
While not mandatory, executing a gift deed can establish a legal record documenting the transfer of shares, providing additional clarity and evidence of the transaction.
What are the brokerage fees associated with gifting shares?
The brokerage fees for gifting shares may vary depending on the brokerage firm and the specific transaction details. It's advisable to check with your broker to understand the applicable fees for gifting shares from your demat account.
How long does it take for gifted shares to be credited to the recipient's demat account?
The time taken for gifted shares to be credited to the recipient's demat account can vary depending on various factors, such as the processing time of the depository participant (DP), the efficiency of the transfer process, and any specific requirements or conditions set by the DP or brokerage firm. Typically, the transfer process may take a few days to complete.
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First Published:
30 Apr 2024, 03:10 PM IST
Business NewsMoneyDemat Account: Planning to gift shares? Here’s how the process works
