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Abhishek Gupta   08 August 2022

Can i save stcg on profit from us stocks by gifting them to parents (with no income) who sell them?

I work for a MNC in India which has it's stock listed on NASDAQ in USA. I get RSUs of the US stock as a part of my compensation (listed under perquisites in form 16).

Scenario:

Note that my mother, father and the HUF have almost no income.

I gift "x" amount of those vested stocks to mother, "y" amount to my father and "z" amount to my father's HUF.

Assumptions/Understanding:

(1) These gift transactions would not trigger any tax payment at both ends (giver and receiver) as they are exempted relatives.

(2) Given this transaction happens electronically (from my trading account to the receiver's trading account), a record is always available of this transaction so a Gift Deed is not required.

(3) Since the gift is not given to the spouse here so clubbing provision don't apply here.

(4) NASDAQ listed equity is counted as unlisted shares and STCG at tax slab is applied for sale under 24 months, LTCG at 20% with indexation after 24 months applies.

(5) The cost and date of acquisition of the gifted stock in the receiver's hand would be the same as me (the giver).

(6) If my mother sells "x" amount of stocks within 24 months of the date of acquisition (not gifting), STCG would apply on the profit derived from "x" amount of stocks (sale price - cost of acquisition) as a part of her normal income as per her tax slab. And given her income is almost negligible that profit (upto a max of 10 lakhs) gets taxed at a rate much lower than 34.32% (had I sold them, I would have paid at 34.32% or had I waited for LTCG to kick in, 20% with indexation benefit). Is this understanding correct?



Learning

 1 Replies

Swadha   09 August 2022

Yes, you can transfer unlisted shares to your parents as gifts and capital gain earned on them shall be taxed in the hands of the transferee. (Please check your company’s policy if the transfer is permissible or restricted)

Your understanding of LTCG/ STCG taxation is correct, but HUF shall not be considered as your “relative” as per the income tax act. So if the value shares transferred to your father’s HUF is more than INR 50K then tax under IFOS shall be levied on FMV of shares on the date of transfer in hands of HUF.


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