It isn’t important to execute reward deed for transferring shares

FILE PHOTO: Shares are considered as “movable property” for the purposes of the Income Tax Act, 1961, and it is not mandatory to execute a gift deed for this purpose (REUTERS)

I must reward shares value only some lakhs of rupees to my mother or father, who’s retired and has no earnings, in order that the dividend can be utilized as earnings. Will I’ve to make a present deed and register it? Will my mother or father be taxed? Can my mother or father reward or will as soon as extra the shares to me at a later date?

– S. Arora

Shares are thought to be “movable property” for the desires of the Revenue Tax Act, 1961, and it isn’t important to execute a present deed for this goal. Nonetheless, executing a present deed will assist create a licensed file evidencing the swap. You may additionally take into accounts taking a simple receipt out of your mother or father, acknowledging the swap as shortly as full, so your info are furthermore full for submitting options.

Assuming the shares are in demat kind, you will must fill a present instruction slip (DIS) and submit it to the depository participant (DP). To fill the DIS, you will must ask your dad and mom for his or her DP ID, DP set up and shopper ID. You could require these particulars together with ISIN (Worldwide Securities Identification Quantity).

The reward of shares to your mother or father will possibly be tax-exempt as a result of it might very effectively be labeled as ‘property obtained from a relative’, which is very exempt on account of the proviso to Half 56 (2)(x) of the I-T Act. Upon ending the requisite swap formalities, the reward itself is irrevocable. As shortly as a result of the shares replicate in your dad and mom’ DP account, your dad and mom will possibly be at liberty to deal with it as they want—together with promoting or onward gifting. We might advocate that your dad and mom alternate their respective Wills (if already made) to repeat these shares, after which bequeath the equal as soon as extra to you beneath the talked about Will. Updating of the Wills ought to be accomplished no matter any future plans that your dad and mom might have, to avoid the shares devolving intestate in case of demise.

If the underlying goal is to place additional liquidity/money in your dad and mom’ arms, then you definately’ll take into accounts leaving the shares in your set up, and as a substitute gifting the dividend earnings or utterly totally different money owned by you, to your dad and mom as a substitute. This avoids any problems with getting the shares transferred as soon as extra to you.

Rishabh Shroff is companion, Cyril Amarchand Mangaldas. Queries and views at

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