Tax on Gift and Inheritance of Shares
Gifting or inheriting shares has specific tax rules. Here’s what to know about cost, holding period and clubbing.
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Transferring shares as a gift or inheritance is common in families, but the tax treatment has nuances worth understanding. This is general education, not tax advice.
Receiving shares as a gift
- From specified relatives (parents, spouse, siblings, etc.) — gifts are generally not taxable in the receiver’s hands, regardless of value.
- From non-relatives — shares received free or cheap can be taxable as income if the value exceeds the ₹50,000 threshold (gift tax on shares).
Inheritance
Shares inherited through succession or a will are not taxed at the time of inheritance. Tax only arises later, when you eventually sell them.
The crucial part: cost and holding period carry over
When you later sell gifted or inherited shares, for capital gains:
- You use the original owner’s purchase cost (and date), not the value on the gift/inheritance date.
- The holding period includes the previous owner’s, so long-held shares can qualify for LTCG treatment. Grandfathering of pre-2018 gains may also apply.
Watch clubbing of income
If you gift shares to your spouse or minor child, any income/gains may be clubbed back with your income under tax rules — so gifting doesn’t always shift the tax.
Rules are detailed and change — keep records of the original cost and consult a professional. Education only, not tax advice.
