Reporting of Gift undertaken of foreign shares on Sch FA/CG on ITR 2

Hey Jatin, great question about gifting foreign shares and how to report that in ITR-2!

Here’s how you can approach it:

Reporting Gift of Foreign Shares in ITR-2

1. Schedule FA (Foreign Assets):

• Schedule FA requires reporting foreign assets held at the end of the financial year.

• Since you are gifting these shares and they will no longer be in your name by the end of the FY, their closing balance will be NIL.

• So, you simply do not report those gifted shares in Schedule FA for that year, as you do not hold them anymore.

2. Schedule CG (Capital Gains):

• Since this is a gift (no sale/transfer consideration), no capital gains transaction arises at the time of gifting.

• Therefore, you do not need to report anything under Schedule CG for this gift.

• The gift is a transfer without consideration and is exempt from capital gains tax for the donor.

Additional Points:

• Disclose Gift in Other Schedules?
  The Income Tax return doesn’t have a specific section to disclose “gifts” of foreign assets separately.

• Gift Deed / Documentation:
  Keep a copy of the gift deed or transfer documents for your records in case of future scrutiny.

• Recipient’s Tax Liability:
  Your son, as a US citizen, will be liable for tax as per US laws on these shares once he receives them.

Summary:

• Do not report the gifted foreign shares in Schedule FA (since balance is zero at year-end).

• Do not report any entry in Schedule CG (no capital gains on gift).

• Maintain supporting documents of the gift.