How to transfer shares to spouse or blood relative or other person? Step by step guide

How to transfer shares to spouse or blood relative or other person? Step by step guide

Sat, 10/08/2016 - 11:33
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Suppose you want to transfer shares to spouse's account as wedding anniversary gift or any other person for that matter. Then how to transfer or gift shares? This article will explain step by step guide to transfer shares. Also, we will look into tax implications in it.

We will discuss 2 ways to transfer or gift shares.

  1. Transfer shares directly in Demat account.
  2. Transfer shares which are in certificate form.

Let's go deep in these options. 

How to transfer shares directly in Demat account of spouse or any other person?

Make sure for this transfer your spouse has a Demat account.

Step 1

You to initiate an off-market transaction by submitting a Delivery Instruction Slip (DIS) to your Demat account providers like Sharekhan or Zerodha.

So from where you will get this DIS form ?

Most of the Demat account providers provide Delivery Instruction Slip (DIS) booklet at the time of opening account. Use that booklet's slip to transfer shares. If you don't have DIS then you can request for new DIS booklet by visiting broker's office or calling them.

Step 2

Fill all required fields in Delivery Instruction Slip such as 

  • Name of the receiver
  • Receiver's dp id (Demat account id)
  • Share/Stock to be transferred
  • ISIN Number of the share company
  • Quantity of the Shares to be transferred
Delivery instructions slip
Sample delivery instructions slip (Don't use this slip, it's just sample)

Note that while filling DIS precaution should be taken to avoid misuse. Remember to strike out remaining shares rows which left empty.

Step 3

Submit this slip to your brokerage firm. They will give you a customer copy for the same. Charges may vary from broker to broker but they are very minimal.

On other hand make sure your spouse or receiver has a standing receipt instruction (an instruction given by the client to receive any shares in his account)

If the spouse didn't have standing receipt instruction then he/she will have to fill up the receipt instruction with details of the transferor i.e you. The standing instruction is normally the default option.

Step 4

It is advisable to execute a gift deed on a non-judicial stamp paper by mentioning the details of the transaction for legal records and to avoid any tax queries in future.

Done! within the week your spouse will get the lovely gift from you in his demat account.

How to transfer shares those are in physical/paper/certificate form?

If your shares are in physical/paper/certificate form, then you need to fill a share transfer form. Your signature is required on that form. Submit this form to company's share transfer registrar. Once the transfer deed is registered, the share transfer is complete. Shares will be transferred in your spouse's name in the physical form. 

What if I want to transfer physical shares in Demat account of spouse/ relative?

If your spouse/ relative has a Demat account, after the shares are transferred to her/his name, she/he needs to submit the physical certificates of her name to a broker. Then the shares will be transferred to their Demat account.

What are the taxes those need to be paid on the transfer of shares in India?

Transfer of shares will be considered as a gift according to Section 56 of the Income Tax Act, 1961. So the person who receives shares may or may not have pay taxes on it.

Who need not to pay taxes? - Blood relatives

If you have transferred shares to spouse or blood relatives then it is completely exempt from tax irrespective of the amount of the shares under section 56(2)(vii) of Income Tax Act, 1961. Below is list of relatives can be considered for tax exemption.

  • Spouse of the Individual
  • Brother or Sister of the Individual
  • Brother or Sister of the spouse of the Individual
  • Brother or Sister of either of the parents of the Individual
  • Any Linear ascendant or descendant of the Individual
  • Any Linear ascendant or descendant of the spouse of the Individual
  • Spouse of the person mentioned above

Who needs to pay taxes? - Other persons those aren't blood relatives

If shares amount is greater than 50,000 ₹ then it is taxable for the receiver.

Only on the occasion, of marriage or any other such ceremonial occasions the gift in excess of ₹ 50,000 would not be liable to income tax at all.

Note:

All forms images are used here are for sampling purpose don't use it. Asks for original forms to your brokerage firm. Please get in contact with your broker customer care to understand these procedures more. 
 

Taxes rules can vary from country to country or can be changed any year so it's better to contact Chartered accountant for you tax calculations.

Also check : How to change the broker and transfer shares to new Demat account?

 

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