Taxation of Gift
This query is : Resolved
17 May 2011
What would be the tax implication if any person other than Individual and HUF receives gift of listed company's share from any person? Whether this gift is covered by section 47 or any other provision of the income tax act and not regarded as transfer?
If not, then pls state the relevant provision of the Income Tax Act under which this transaction is covered.
If not, then pls state the relevant provision of the Income Tax Act under which this transaction is covered.
17 May 2011
above 50000 market value, its taxable in hands of receipent
17 May 2011
Mr Sharma
thanks a lot..
Plz throw some light on the section in which it is taxable?
Further Section 56(2)(vii) determines taxability of gifts only if recipient of gift is Individual & HUF?
Moreover Finance Act 2010 has introduced section 56(2)(viia) which says if a pvt ltd company/firm receives from any person gift of shares (exceeding Rs 50,000) of another private limited company on or after 01.06.2010 then fair market value of such share would taxable in the hands of recipient.
What if instead of private limited company shares, gift is made in the form of public listed co's share by tranferring the shares from the Demat A/c of payer into the Demat a/c of the recipient?
thanks a lot..
Plz throw some light on the section in which it is taxable?
Further Section 56(2)(vii) determines taxability of gifts only if recipient of gift is Individual & HUF?
Moreover Finance Act 2010 has introduced section 56(2)(viia) which says if a pvt ltd company/firm receives from any person gift of shares (exceeding Rs 50,000) of another private limited company on or after 01.06.2010 then fair market value of such share would taxable in the hands of recipient.
What if instead of private limited company shares, gift is made in the form of public listed co's share by tranferring the shares from the Demat A/c of payer into the Demat a/c of the recipient?
17 May 2011
http://www.simpletaxindia.org/2010/03/gift-tax-tax-on-gift-budget-2010.html
18 May 2011
the link provided does affirm that if any person other than individual & HUF receives gift in the form listed public company shares from any person, then this transaction is outside the provisions of Section 56(2)(vii) and not taxable.
If not plz elaborate
If not plz elaborate
26 July 2025
You're absolutely right to drill down into the **nuances of gift taxation**, especially regarding **gifts of listed shares** received by **non-individual / non-HUF recipients**.
Let's break down the relevant law and clear up your query with reference to the **Income-tax Act, 1961**, including **Section 56(2)(vii)** and **56(2)(viia)**.
---
### ✅ Your Question in Short:
> *What is the tax treatment if a person other than an Individual or HUF (say, a Company or Firm) receives listed shares as a gift from any person?*
---
## 🔍 Relevant Legal Provisions:
### 1. **Section 56(2)(vii)**
* Applies **only** to **Individuals** and **HUFs**.
* Taxable if:
* They receive gifts (cash or specified property, including shares) **without consideration** or for **inadequate consideration**, and
* Value > ₹50,000.
* **So, this section does NOT apply** to **companies, firms, AOPs, BOIs, etc.**
✅ **Listed company shares gifted to a non-individual are NOT taxable under Section 56(2)(vii)**.
---
### 2. **Section 56(2)(viia)** *(Introduced via Finance Act, 2010)*
* Applies only if the **recipient** is:
* A **Firm** or a **Private Limited Company**, and
* They receive **shares of a private company** **without consideration** or **for less than FMV**.
* **Shares of listed companies are NOT covered** under this provision.
✅ So, **gift of listed shares** to a **firm or private limited company** is **not taxable under Section 56(2)(viia)** either.
---
### 3. **Section 56(2)(x)** – \[Applicable after 1 April 2017]
* Replaces 56(2)(vii) and 56(2)(viia)
* **Much wider** applicability — applies to **all persons**, including:
* Companies
* Firms
* Trusts
* AOPs, etc.
* Covers **any property received** (including listed shares) **without consideration** exceeding ₹50,000 in value.
### 🚨 So, if the gift is **received on or after 1 April 2017**, then:
➡️ It is **taxable under Section 56(2)(x)** in the hands of **any person**, unless exempted under certain exceptions (e.g., gift from relative, in contemplation of death, under inheritance, etc.)
---
## 📌 Capital Gains Implications (Section 47)
You asked:
> Is it covered by Section 47 and not regarded as transfer?
### ✔️ Section 47(iii):
> Any transfer of a capital asset **under a gift or will or an irrevocable trust** is **not regarded as a transfer** for the purposes of **capital gains**.
✅ So:
* **In the hands of the donor (giver)** → Not treated as transfer → **No capital gains tax**
* **In the hands of the recipient (receiver)** → Only **taxable under Section 56** if applicable
---
## ✅ Final Position Summary:
| Point | Tax Treatment |
| --------------------------------------------------- | ---------------------------------------------------------------------------- |
| Gift received before 01.04.2017 by non-individual | **Not taxable** (outside Section 56(2)(vii) or (viia)) |
| Gift received on/after 01.04.2017 | **Taxable under Section 56(2)(x)** if FMV > ₹50,000 and no exemption applies |
| Donor (giver) taxation | Not a taxable transfer under Section 47(iii) → **No capital gains tax** |
| Gift of listed shares (received by company or firm) | After 01.04.2017: **taxable**, Before that: **not taxable** |
---
## ✍️ Example:
* **Date of gift**: May 2023
* **Recipient**: A private limited company
* **Gift**: 1,000 listed company shares (FMV ₹3 lakh)
* **Donor**: An individual (non-relative)
✅ This is **taxable under Section 56(2)(x)** as “income from other sources” in the hands of the company, unless the gift qualifies under exempt categories.
---
If you can share the **date of gift** or more about the **recipient's nature**, I can give you a sharper answer.
Let's break down the relevant law and clear up your query with reference to the **Income-tax Act, 1961**, including **Section 56(2)(vii)** and **56(2)(viia)**.
---
### ✅ Your Question in Short:
> *What is the tax treatment if a person other than an Individual or HUF (say, a Company or Firm) receives listed shares as a gift from any person?*
---
## 🔍 Relevant Legal Provisions:
### 1. **Section 56(2)(vii)**
* Applies **only** to **Individuals** and **HUFs**.
* Taxable if:
* They receive gifts (cash or specified property, including shares) **without consideration** or for **inadequate consideration**, and
* Value > ₹50,000.
* **So, this section does NOT apply** to **companies, firms, AOPs, BOIs, etc.**
✅ **Listed company shares gifted to a non-individual are NOT taxable under Section 56(2)(vii)**.
---
### 2. **Section 56(2)(viia)** *(Introduced via Finance Act, 2010)*
* Applies only if the **recipient** is:
* A **Firm** or a **Private Limited Company**, and
* They receive **shares of a private company** **without consideration** or **for less than FMV**.
* **Shares of listed companies are NOT covered** under this provision.
✅ So, **gift of listed shares** to a **firm or private limited company** is **not taxable under Section 56(2)(viia)** either.
---
### 3. **Section 56(2)(x)** – \[Applicable after 1 April 2017]
* Replaces 56(2)(vii) and 56(2)(viia)
* **Much wider** applicability — applies to **all persons**, including:
* Companies
* Firms
* Trusts
* AOPs, etc.
* Covers **any property received** (including listed shares) **without consideration** exceeding ₹50,000 in value.
### 🚨 So, if the gift is **received on or after 1 April 2017**, then:
➡️ It is **taxable under Section 56(2)(x)** in the hands of **any person**, unless exempted under certain exceptions (e.g., gift from relative, in contemplation of death, under inheritance, etc.)
---
## 📌 Capital Gains Implications (Section 47)
You asked:
> Is it covered by Section 47 and not regarded as transfer?
### ✔️ Section 47(iii):
> Any transfer of a capital asset **under a gift or will or an irrevocable trust** is **not regarded as a transfer** for the purposes of **capital gains**.
✅ So:
* **In the hands of the donor (giver)** → Not treated as transfer → **No capital gains tax**
* **In the hands of the recipient (receiver)** → Only **taxable under Section 56** if applicable
---
## ✅ Final Position Summary:
| Point | Tax Treatment |
| --------------------------------------------------- | ---------------------------------------------------------------------------- |
| Gift received before 01.04.2017 by non-individual | **Not taxable** (outside Section 56(2)(vii) or (viia)) |
| Gift received on/after 01.04.2017 | **Taxable under Section 56(2)(x)** if FMV > ₹50,000 and no exemption applies |
| Donor (giver) taxation | Not a taxable transfer under Section 47(iii) → **No capital gains tax** |
| Gift of listed shares (received by company or firm) | After 01.04.2017: **taxable**, Before that: **not taxable** |
---
## ✍️ Example:
* **Date of gift**: May 2023
* **Recipient**: A private limited company
* **Gift**: 1,000 listed company shares (FMV ₹3 lakh)
* **Donor**: An individual (non-relative)
✅ This is **taxable under Section 56(2)(x)** as “income from other sources” in the hands of the company, unless the gift qualifies under exempt categories.
---
If you can share the **date of gift** or more about the **recipient's nature**, I can give you a sharper answer.
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