Trasnfer of Share by way of gift

1.  If shares are transferred to a non-relative (Relative defined under second proviso to  Section 56(vii)

2. On or after 1.10.2009

3. The aggregate fair market value (FMV) of  shares transfereed exceeds Rs 50000/- on that date

If all the 3 conditions are satisfied collectively

Then FMV of shares transferred will be treated as income of the transferee.

Book Entry  -

Transferor-

Capital A/c                                 Dr

To  Investment in Shares A/c 

Transferee

Investment in Shares A/c Dr.                  

To Income from Shares Recd in Gift (IFOS)

I agree with Mr. Paras Bafna

In addition to what Mr. Paras Bafna said,

It is pertinent to note that under newly inserted section 56(2)(viia) Gifts of 'shares of closely held company' received by a firm or another closely held company shall be taxable in the hands of the recipient if the fair market value of such transferred shares Less consideration exceeds Rs. 50,000

 Conversely, any transfer of shares as gifts, other than shares of closely held company to a firm or a company shall be exempt in the hands of such company or firm.

This section has been inserted w.e.f. 1-6-2010.