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Transfer of shares from father to son

Akshay (Student) (25 Points)

16 April 2015

Hi. I have been trading on behalf of my Father for a while now. My father is in possession of equity shares amounting to about Rs.12 lacs which were purchased about 10 years ago. I wish to start trading using these shares. But, I am confused whether to still trade using my Fathers Demat/Trading Ac or to transfer these shares to My Demat/trading Ac. I do not file returns at the moment as im studying.

Also, If my father transfers the shares to me via an OFF-MARKET transfer, will the shares be still treated as LTCG when i sell? or would i have to pay STCG @ 15% ?

Would i be liable to pay tax when my father transfers the shares to my demat account? and is a GIFT DEED recommended for such a trasaction? Pls Advice

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Aaruhi (Student CA CPT ) (26 Points)
Replied 17 April 2015

1. Purchase Transfer Deeds according to number of scrips. Signatures of both Transferor and Transferee are required on that Transfer Deed.

2. You need to pay Transfer charges while filling out a Transfer Deed, which is currently at Rs.2.5 per Rs.100 of shares. The value of shares (technically called as Consideration), can be calculated on any particular date as decided by you. So, if you decide to select 21/22 January as that date, it would be cheaper as share prices fell on that day. The consideration date cannot more than 15 days old.

Share Transfer Stamps is the manner in which one can pay transfer charges on shares.

3. Send those totally filled with Transfer Deeds to the Registrar of the respective company.

4. It might take at least 1 month or maybe more for shares to be transferred into your name and further 15 days in dematting them in your account.

Alternatively, open a Demat account in your father's name and get the shares dematted and later on transfer them into your own account. It would be easier, quicker and cheaper option to go for in my view. Your father can always close his Demat account at any point of time. Isn't it?

Good Luck!

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Akshay (Student) (25 Points)
Replied 17 April 2015

Hi Aaruhi. Thanks for your reply. The shares I have mentioned are already in Demat form(in my fathers name) and he wishes to transfer the same to my Demat Ac. He can, instead, sell the shares in his own account and transfer the proceeds to my account. I want to know, which one of the two would be a better option, keeping in mind the tax implications for both. Would I be liable to pay tax on the amount if my father transfers an amount of Rs.12,00,000 to my account? or Is Demat to Demat transfer a better option?