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Shares gifted by father

work is worship (Service) (2728 Points)

19 October 2009

HI.. a querry..

where a individual has been gifted 100 shares of SBI flexi bond at 60 per share when he was a minor.. Now he a major wants to sell and the price is rs 2500 per share.. His father is still having taxable income and filing return. Capital gains would be taxed in whose hands..

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5 Replies

Sunil (Trader) (2611 Points)
Replied 20 October 2009

What has been gifted is not equity shares but Bonds. The income from thes bonds is now to be assessed in the hands of the holder itself as he is no longer a minor but an adult now. A transfer from a father by gift to a MINOR son, even though a transfer technically will not attract any income tax on the transfer as father is the natural guardian of minor and it is as good as transferring the bonds to himself. The interest or income is clubbed during minority of the son.

Now son can sell bond without father's consent as he is major and the asset is his own to appropriate. The income is also his. When he sells it you only have to count the date the father purchased (not transferred) the bonds for purpose of long term or short term asset. If this period is over 36 months you have to take long term capital gain without indexation (difference in selling and purchase price) and pay tax @ 20%. If less than 36 months it is included in the income as short term gain and taxed. This is usually treatment for Bonds. Maybe there could be a special treatment specifically for sbi flexibonds as far as special rate of taxation is concerned. Refer to the offer document.

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vaibhav (M.Com. CA ) (178 Points)
Replied 20 October 2009

Hi subra

Gifted shares / bonds shall be chargeble to capital gain tax in the hands of son, as he is major now.

vaibhav

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 21 October 2009

Taxable in the hands of the son only

CA Rahul Jain (CA) (1162 Points)
Replied 21 October 2009

Income to be taxed in the hands of son and for this purpose as per sec 47 of IT Act, cost of the bonds would taken as the cost to the previous owner.

If the gain is LT(more than 3 years), indexation will be applicable.

Sunil (Trader) (2611 Points)
Replied 21 October 2009

Indexation is specifically not applicable for bonds and debentures. But it is applicable for sale of equity shares in unlisted or pvt. ltd. companies where exemption of Long Term Gain is not available.