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Tax Implication of transfer of shares from jointly held demat account to Singly held demat account


Desabandh Real   20 February 2020

Desabandh Real

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Respected learned Experts...

 

Myself and my brother hold demat account in our joint names with my brother as first holder. What is the tax implication of transfer of some shares from this demat account to another demat account where my brother is second holder & his wife is first holder.

Will the transfer attract Income tax, LTCG, or any tax?

What is the procedure to do the transfer from this jointly held demat account and what form need to to filled ?

On receipt of the shares in my brother's jointly held demat account, should he inform the same in his income tax returns?

 

Kindly enlighten sirs...

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Nandakumar K Konkar (Partner)     20 February 2020

Nandakumar K Konkar
Partner 
 12 likes  218 points

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This issue shall be settled by 'economic ownership' & not 'legal ownership' of these listed shares.(assuming that shares are listed.) I am assuming that as 2nd holder, you contributed to purchase cost in some ratio; if not (full cost was borne by your brother), you will not have any tax implication. Also, since you have not mentioned amount of consideration for the proposed shares transfer, this seems to be  a gifting arrangement.

Assuming that you paid for purchase cost in some ratio,  this shall be a gift from you to your sister-in-law, since your brother shall be common in both demat accounts. This shall be an 'off-market' transaction (from demat to demat a/c) at zero value & not through a stock exchange. You may do this off-market transaction either on-line or through your broker.  Gift to brother's wife (relative) is exempt from capital gains u/s 56, so this transfer shall not have any tax implication for you, your bro & sis-in-law at this time. However, in event of sale of these shares, cost to you (previous owner) shall be cost to your sister-in-law u/s  49, hence details of your cost should be shared with her.  This shall apply to your bro also (original cost shall be cost to him at time of sale). So far as disclosure in ITR goes, only high net worth individuals with taxable income exceeding Rs. 50 Lakhs are required to give details of investments, otherwise no disclosure is needed for your sis-in-law ;but she will have to disclose cost of these shares as exempt gift received from relative. No need for you & bro to disclose this transaction.                                                                                     

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Nandakumar K Konkar (Partner)     20 February 2020

Nandakumar K Konkar
Partner 
 12 likes  218 points

View Profile | My Other Post

This issue shall be settled by 'economic ownership' & not 'legal ownership' of these listed shares.(assuming that shares are listed.) I am assuming that as 2nd holder, you contributed to purchase cost in some ratio; if not (full cost was borne by your brother), you will not have any tax implication. Also, since you have not mentioned amount of consideration for the proposed shares transfer, this seems to be  a gifting arrangement.

Assuming that you paid for purchase cost in some ratio,  this shall be a gift from you to your sister-in-law, since your brother shall be common in both demat accounts. This shall be an 'off-market' transaction (from demat to demat a/c) at zero value & not through a stock exchange. You may do this off-market transaction either on-line or through your broker.  Gift to brother's wife (relative) is exempt from capital gains u/s 56, so this transfer shall not have any tax implication for you, your bro & sis-in-law at this time. However, in event of sale of these shares, cost to you (previous owner) shall be cost to your sister-in-law u/s  49, hence details of your cost should be shared with her.  This shall apply to your bro also (original cost shall be cost to him at time of sale). So far as disclosure in ITR goes, only high net worth individuals with taxable income exceeding Rs. 50 Lakhs are required to give details of investments, otherwise no disclosure is needed for your sis-in-law ;but she will have to disclose cost of these shares as exempt gift received from relative. No need for you & bro to disclose this transaction.                                                                                     


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