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How can you Gift Stocks

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We are all stuck at once in our life when it comes to selecting gifts for someone. Every year we purchase gifts on birthdays, weddings, anniversaries, and other special occasions.

But it becomes difficult to purchase a budget-friendly and attractive gift. If we plan to give the car, diamond rings, or gold as a gift, it can surprise a person. But we are looking for budget-friendly gifts that will add some value with the time then the stocks are the best option.

Suppose you are a mother or father. Every year you give a birthday gift to your child that can be anything.

But if you add on those gifts with stocks of any affordable amount then, after 18 years of compounding, you will notice the value that those gifts added to the wealth of your child that may help your child buy his dream car or invest in abroad studies and much more.

That’s how stock gifting proves its worth with the time.

Let’s dive into the concept to know the complete insights of the gifting process.

What is Stock gifting?

Stock gifting is a revolutionary change in terms of giving gifts. Zerodha is the very first brokerage platform that offers this opportunity where you can gift stocks and ETFs to your loved ones.

Introducing the concept of long-term investing by gifting stocks, ETFs, mutual funds, and gold bonds where anyone who has their Demat accounts can receive or send gifts.

You can even gift stocks to the kids and make them aware of investments and money management processes.

It is important for you to know gifted stocks with the capital gain will be moved with the gain to the Demat account of the receiver.

This implies that the receiver will have to pay taxes (such as the difference between the buy price and the selling price) on the capital gains if he/she sells out the stocks in the future.

What are the requirements?

There are some basic requirements you need to complete before gifting any shares of stocks to someone.

  • Firstly, both sender and receiver must have a Demat account, if you don't have then open your Demat account now
  • Senders need to verify the shares of stocks whether it is available for gifting or not
  • After selecting the shares, you should have receiver information such as name, mobile number, and email address that you need to fill.

How can you gift Stocks?

There are a number of brokers in India who offer different processes for giving stocks as a gift. Here you can understand how to gift stocks using the Zerodha platform.

  1. In the very first step, you need to visit the console.zerodha.com/gift
  2. Then, you have to fill out the form where you need the Name, Email, and mobile number of the receiver
  3. Now, you need to look over the stocks, ETFs, gold bonds and select the asset that you want to gift and already approved for gifting
  4. After sending the stocks as a gift you need to hold on until the receiver accepts the gift within 7 days. If the receiver already has a Demat account in Zerodha they can accept it without any hassle. Otherwise, they need to open a new account and then accept
  5. The moment the receiver accepts the gift, immediately you get an email or SMS where you need to verify the receiver's identity and confirm the transfer of stocks utilizing your CDSL TPIN
  6. After performing the above steps successfully, Off-market gift transactions at CDSL will be initiated by Zerodha that you need to use to cross-check by entering an OTP sent to you by CDSL
  7. After all this, on the same day if it is a trading day or next trading day you will receive an email and SMS from CDSL at sharp 5 PM where you need to confirm the off-market gift transaction by visiting www.cdslindia.com. Now, add your PAN or 16 digits Demat account ID and complete the SMS OTP authentication before 8 PM on the same day
  8. At last, your stocks are successfully transferred from your Demat account and added to the receiver‘s account. Holdings will take 24 hours to appear in the receiver account.

Open Demat Account with Zerodha Now

How much is the cost charged for gifting stocks?

While gifting the stocks the standard off-market transfer fee is chargeable which is ₹25 + 18% GST or it can be 0.03% per stock. This is an automated process and debited from the sender’s trading account.

What are the tax implications of stock gifting?

The price of stocks gifted defined the tax implications. The receiver may get the tax implications if the price of the gift is more than ₹50,000.

Kindly keep in mind that gifting stocks from your Demat account and selling them at the same time may put you in trouble and that may result in an exchange auction penalty.

Tax Implications for the sender of the gift-

  • The sender is not required to pay any tax on gifts since the Gift Tax Act (GTA) was repealed.
  • Under the Income Tax Act, Capital Gains are taxable whenever you transfer any capital asset.
  • In spite of that, 'gift' is expressly excluded from the precision of 'transfer' in Section 47. As a result, the sender of a gift is exempt from paying income tax on the transaction.

Tax Implications for the receiver of the gift-

  • Under Section 56(2) of the Income Tax Act, gifts of movable property, such as shares, ETFs, mutual funds, jewelry, drawings, and so on, made without consideration and with a fair market value of more than ₹50,000 are taxable in the receiver’s hands.

In the following instances, taxes on the gifting of shares are not considered:

  • There are no tax implications if you are gifting stocks to your family members even above ₹50,000 (including siblings, spouse, and lineal ascendants or descendants)
  • On the occasion of a marriage, an individual receives a gift
  • Gift received by course of inheritance.

How do you give stocks offline as a gift?

Apart from the digital process, you can also give stocks as a gift by offline method. You are easily able to transfer the stocks off-market that are held with NSDL or CDSL.

  • If you choose an offline procedure for that you need to fill out the Delivery Instruction Slip (DIS)
  • The form needs some necessary details of the account where stocks are being transferred. You need the details of the ISIN number of the shares to be transferred, the company’s name, Demat account number, and DP ID to complete the form
  • After completing the form properly, you have to visit the old broker’s office to submit the form to proceed further.  

What are the benefits of Stock as a gift?

There are a lot of benefits of stocks as a gift. The receiver of the gift can have the advantage if the stock's prices fluctuate positively in the stock market.

  • Here are some benefits that will make you understand why it is imperative to give stocks as a gift.
  • Nowadays, gifting stocks is one of the best options as the value of stocks increases with time
  • It will reward you with high returns
  • Shares are highly liquid investments which is a great advantage for the shareholders. They can sell the equities or shares and make money whenever required
  • One more precious benefit is shareholders get dividends from blue-chip companies which generate income for those who own the shares of the company
  • The sender can also get the opportunity to avail best offers such as if the stocks have gained in value then, they don’t need to pay taxes on those particular earnings or gains.

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