Gift of Gifted unlisted shares

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This discussion explores the tax implications of gifting unlisted company shares to relatives. The initial query questions whether gifting shares to an aunt and subsequently by the aunt to her son would incur capital gains or taxable income, assuming both transfers are between relatives. The response clarifies that a gift from an individual to their aunt is taxable as they are not considered a relative under Section 56(2)(x) of the IT Act. A subsequent scenario involving gifting to a mother who then gifts to the aunt, who then gifts to her son, is also considered.

Arvind Chippa

Arvind Chippa (Querist)
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02 October 2024 Hi,

I have a query regarding gifting shares.

I want to gift shares of Unlisted Co. to My father's brother's wife (Aunt). My query is as follows.

Lets say subsequently my Aunt wants to gift those shares to her son.

There would be no capital gain or income from other source & no taxable income, either for transferor or for transferee since in both cases the shares are gifted to RELATIVE. Is this correct?

& Clubbing Provisions of IT Sec 64 (or 60 or 61) or any other deeming provisions would NOT come into play. Is this correct?

Thank you very much.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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02 October 2024 Gift received by your aunt from you is taxable, as you are not RELATIVE to her as per sec. 56(2)(x) IT act.

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Arvind Chippa

Arvind Chippa (Querist)
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03 October 2024 Thank you, Sir.
and what if,
I gift shares of Unlisted Co. to My Mother.
She gifts those shares to my father's brother's wife (Aunt)
and,
my father's brother's wife (Aunt) gifts those shares to her son.
Kindly reply
Thank you very much.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 October 2024 That is OK, but there can be shorter route.

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