Share switch: When it’s worthwhile to make a present deed

My good friend had   bought 100 shares of Vaniti organics @ Rs.50/   within the yr 2000 for  Rs.5000/- on my behalf. The shares are nonetheless in his demat account. After cut up and bonus the variety of shares has elevated to 750 and the current worth of those shares is round 15 lakh. When the shares are transferred to my account, is any tax is relevant?  If so,   any settlement is to wanted to be made on stamp paper? 

It is tough to imagine and persuade anybody that the shares purchased by your good friend in your behalf 22 years in the past remained with him so lengthy. So it is going to be tough so that you can declare that these shares belong to you. The different possibility so that you can get these shares again is to make your good friend present these shares to you.  Gift tax has been abolished lengthy again and as a substitute of the donor paying tax on presents made now the recipient of the present has to pay tax on the worth of presents obtained if the combination worth of all of the presents obtained throughout the yr exceed fifty thousand rupees. 

Though there are specific transactions that are exterior the ambit of such taxation however your case just isn’t lined beneath any of these transaction due to this fact you’ll have to embody the market worth of the shares on the date of present in your earnings and pay taxes accordingly. 

Please observe there is no such thing as a tax legal responsibility in your good friend for this transaction. You will even need to pay advance tax on market worth of those shares together with tax legal responsibility in respect of your common earnings. For implementing the transaction, it is best to put together a present deed on stamp paper.  For a present to develop into legitimate and full it has to accepted by the recipient additionally throughout the life time of the donor. So your good friend and also you each should signal the present deed. 

Balwant Jain is a tax and funding professional and may be reached on jainbalwant@gmail.com and @jainbalwant on Twitter

Subscribe to Mint Newsletters

* Enter a legitimate electronic mail

* Thank you for subscribing to our e-newsletter.