How do you gift a stock to someone?

Are you seriously thinking about gifting stocks to someone? It’s a great idea as gifting stocks can be a meaningful and strategic way to share wealth, teach investing, or transfer assets within a family. Having said that, in India, how to gift stock involves specific regulatory, procedural, and tax-related steps that you must understand thoroughly. In this blog post, we’ll take you through exactly how to gift stocks, what to watch out for, and how to make sure it’s done cleanly and legally.

Why Gift a Stock?

There are several reasons you might want to gift stocks:

• Wealth Transfer: Share your financial success with loved ones.
  
• Educational Purpose: Introduce someone to the world of investing.
  
• Tax Planning: Use gift strategies to move assets without triggering immediate capital gains.
  
• Legacy Building: Pass on shares as part of estate or family planning.
  

Is It Legal to Gift Stocks in India?

Yes. Gifting stocks in India is completely legal. Securities like listed shares, ETFs, and mutual funds can be transferred via demat accounts. Regulatory frameworks (through depositories like CDSL / NSDL) allow off-market transfers. 

Since the Gift Tax Act was abolished, there’s no separate gift tax, but income tax rules under the Income Tax Act govern gifted securities. 

Step-by-Step Process: How to Gift Stock

Here’s how to gift stock in India in practical terms:

A. Using a Broker (Demat)

1. Login: Log in to your broker’s platform (for example, Zerodha).
   
2. Go to Holdings: Navigate to your holdings or demat holdings page.
   
3. Select “Send as Gift”: Choose the security you want to gift and click “Send as Gift.”
   
4. Key in Recipient Details: Fill in the recipient’s name, mobile number, email (if required).
   
5. OTP / Confirmation: After you select securities, confirm via OTP or transaction PIN (TPIN) to authorize the transfer.
   
6. Off-Market Transfer: The transfer happens off-market via demat – not through regular buy/sell exchanges.
   
7. Completion: The recipient will see the shares in their demat account, typically the next working day.
   

B. Using CDSL / NSDL Platforms

• You can directly use platforms like CDSL Easiest or NSDL Speed-e to initiate off-market transfers, without going through a broker.
  
• In this method, you’ll still need the recipient’s demat account details (BO ID) and PAN.
  
• Confirm the transaction via TPIN / OTP.
  

C. Paper-Based Method (Physical Shares)

• Prepare a gift deed stating that the shares are being given as a gift.
  
• Complete and sign the SH-4 transfer form (for shares).
  
• Transfer share certificates and deed to the donee (recipient).
  
• The company’s board needs to convene, pass a resolution, and reissue the share certificate in the recipient’s name.
  

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Charges & Documentation

Broker Fees

• If you gift via a broker like Zerodha, there is a charge of ₹25 per security + 18% GST.
  
• These charges are automatically debited from the sender’s account.
  

Gift Deed & Stamp Duty

• A gift deed (on stamp paper) helps formalize the transaction and provides a record in case of tax scrutiny.
  
• For paper-based share transfer, stamp duty is payable based on the market value of the securities.
  
• The deed and transfer forms should be accepted by the recipient.
  

Tax Implications of Gifting Stocks (How to Gift Stock Tax-Wise)

For the Giver (Donor)

• When you gift shares, you do not pay capital gains tax at the time of gift. This is because Section 47 of the Income Tax Act excludes gifts from the definition of “transfer.”
  
• Since the Gift Tax Act is abolished, there is no gift tax on you, the giver.
  

For the Receiver (Donee)

• If the gift’s fair market value (FMV) is below ₹50,000, there is no tax on receiving it.
  
• If the FMV is above ₹50,000, and the gift is from a non-relative, then the entire value may be taxed under Income from Other Sources in the recipient’s hands.
  
• Gifts from relatives (spouse, siblings, children, parents, etc.) are fully exempt, regardless of value.
  
• Also exempt: gifts received on marriage or via inheritance.
  

When the Receiver Sells the Gifted Stock

• When the receiver sells the gifted shares, capital gains tax applies.
  
• Crucially, the receiver’s cost of acquisition and holding period are taken as that of the original owner (the giver), not from the day of the gift.
  
• That means if the giver held the shares for a long time, the receiver may also benefit from long-term capital gains treatment (if applicable).
  

Other Considerations & Risks

Clubbing of Income

• If you gift shares to your spouse, income (like dividends) from those shares may get clubbed with your own income under tax rules.
  
• For a minor child, income from gifted assets may also be clubbed with the parent’s income. (This depends on age, and other conditions.)
  

Valuation & Fair Market Value (FMV)

• For non-relatives, when you gift stock, the FMV on the date of transfer matters, because that determines the tax for the recipient.
  
• If the day before the gift was a holiday, the “prevailing lowest price” on the prior trading day may be used to calculate FMV.
  

Non-Relatives vs Relatives

• Gifting to non-relatives has more tax risk compared to gifting to relatives, due to Section 56 tax liability for large-value gifts.
  
• The definition of “relative” in tax law is quite broad (spouse, siblings, parents, children, lineal ascendants/descendants).
  
• It’s wise to maintain clear documentation (like a gift deed), especially when gifting large amounts or to non-relatives, to prove that it’s a genuine gift.
  

Practical Use Cases for Gifting Stocks

Here are some real-world scenarios for people like you.  Learning how to gift stock can be pretty useful:

• Parent to Child: A parent gifting shares to a child to start them on investing, or as part of inheritance planning.
  
• Spouse Transfer: One spouse gifts shares to another, perhaps for tax or estate planning.
  
• Gifting to a Friend: Less common but possible; useful for sharing a stake in a business or an investment you believe in.
  
• Charitable Giving: Gifting shares to a registered charity might be more tax-efficient than cash.
  

Key Takeaways

• How to gift stock in India is legal and supported by demat and depository mechanisms.
  
• You can gift via your broker (using off-market transfer) or directly via CDSL / NSDL.
  
• There is no gift tax for the giver; capital gains tax is avoided at the time of gifting.
  
• For the receiver, gifts from non-relatives over ₹50,000 (in FMV) may be taxable under Income from Other Sources. Gifts from relatives are generally exempt.
  
• When the receiver sells gifted stocks, their capital gains tax will use the original owner’s cost and holding period.
  
• Proper documentation (gift deed, transfer forms, etc.) is important, especially for large gifts.
• Be aware of income-clubbing rules in cases such as gifts to spouse or minor children.