Capital gains on shares (Off market debit transactions)

Yes, both are relatives as per IT act.

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Gifts aren't transfers, so no capital gains:

• Sec 47(iii): transfer of a capital asset under a gift isn't a "transfer". Gifting shares off-market to your children creates no capital gain for you, even though AIS shows an "off-market debit".

• Recipient: shares from a relative (parent or child) are exempt (Sec 56(2)(x)). Their cost and holding period are yours (Sec 49(1), 2(42A)).

• Clubbing: if the children are minors, income from the gifted shares is clubbed with the parent's (Sec 64(1A)). For an adult child, no clubbing.

• In the ITR: don't report the gift in Schedule CG. Give AIS feedback that the off-market debit was a gift (not a sale). Keep a gift letter or deed and the DIS (delivery slip) marked "gift".

• Off-market credits received as a gift: same treatment.