Published on:
March 6, 2024
Viraaj Vashishth

Gifting Shares to Children: Tax Implications and GST Considerations

Gifting shares to one's offspring can serve as a thoughtful means of cultivating wealth for the upcoming years. Yet threading through the fiscal repercussions and grasping the role of the Goods and Services Tax in this method is indispensable. This piece delves into the principal facets of bestowing shares to your young ones in the nation of India, regarding both duty and GST angles. 

Tax Implications of Gifting Shares:

The elimination of the Present Tax Act in 2017 did away with a direct taxation levy on presents acquired in the land. However, funding additions tax may nevertheless be relevant when your youngster sells the endowed shares

Capital Gains Tax:

When gifted shares are eventually sold by one's offspring, they become accountable for paying capital gains tax on the amount the selling price surpasses the cost to the giver at the time of acquisition. This divergence involving the costs to successive holders is referred to as the cost of obtaining for the recipient.

Varieties of Capital Acquisition:

The applicable capital gains tax depends on how much time elapsed while the shares were kept: whether only a brief span or a notably longer duration affected the tax ramifications of redeeming the stock. Prolonged holding sometimes qualifies for lower rates than brief possession did.

1. Short-term capital gains are taxed at a higher rate than long-term gains if shares are sold too quickly. For volatile positions held under a year, profits face the holder's full income tax burden. However, investing for the long haul can pay dividends in more ways than one.

2. Patience in the market provides rewards for the disciplined investor. Those who hold equity for over twelve months gain access to preferential capital gains treatment. Either a single-digit tax percentage can be paid on any increase in value. Or, through meeting prerequisites, the first hundred thousand rupees of annual profit claim an exemption. By keeping a long view and resisting panic at dips, taxpayers obtain tax relief and the opportunity to let wealth compound over time.

Important Considerations:

1. Valuation of Shares: Determining the price paid for your child's shares solely involves the fair market price on the day of the gift, not what you originally spent. This can carry significant tax implications when they eventually sell regarding capital gains calculations.

2. Documentation is Key: Proper paperwork showing the date of transfer, your initial cost, and the market value at that moment is essential later for tax filings.

3. Expert Guidance Advised: For large share gifts especially, consulting a qualified tax specialist is strongly recommended to comprehend the particular tax effects and navigate complexities associated with stock donations, as situations can vary greatly.

Benefits of Gifting Shares to Children:

Despite the taxation factors, bestowing shares can offer numerous probable rewards for your young ones:

1. Early Exposure to Investing: Endowing shares can unveil your children to the global of putting and assist them in understanding the notion of riches generation at an immature period. Likewise, it provides a chance to bond over financial discussions.

2. Prospect for Long-Term Growth: Holdings have the possibility for long-haul increases, which can significantly benefit your child's future fiscal well-being. Small regular gifts can help maximize returns over decades.

3. Tool for Tax Planning: By deliberately bestowing shares, you may potentially decrease your overall taxation burden by utilizing your child's lower tax bracket for capital gains, particularly if they select the exception for long-term capital increases up to ₹1 lakh. Early gifts can help compound gains tax-free for years.


While passing shares onto progeny can positively impact their fiscal prospects, awareness of potential tax consequences, like capital gains taxation, is prudent as GST exempts gifting but not necessarily the profits. Disentangling the intricacies benefits from an expert tax preparer's counsel to guarantee adherence to rules. Note that this piece offers broad statements rather than directives—consulting a specialist suits every case. Sophisticated strategies exist to optimize inheritances for heirs, yet navigating regulations warrants soliciting a professional familiar with perpetuating wealth judiciously across generations.


Gift of Property & Tax Obligation: A Comprehensive Guide Income Tax 

Gift Vouchers are Neither Goods nor Services for GST 

Top 13 New Business Ideas for Coimbatore: Inner Entrepreneur 

Updated on:
March 16, 2024