Gifts, Stocks, and Funds: Avoid Costly Tax Traps
Gifting wealth-creating assets can be thoughtful and often tax-efficient over time, but it is crucial to understand the tax consequences for both the giver and the recipient.
Tax Implications of Gifting Financial Assets
If you gift financial assets like mutual fund units or listed shares, the tax rules depend on the value and relationship between the parties involved.
- If the total value of gifts received by an individual or Hindu Undivided Family (HUF) exceeds ₹50,000 in a financial year, the entire amount is taxable under "Income from Other Sources" for the recipient.
- However, gifts from relatives are fully exempt from tax regardless of the amount.
Who Qualifies as a Relative?
For an individual, a “relative” includes:
- Spouse
- Siblings and their spouses
- Parents' siblings
- Direct ancestors and descendants of the individual and their spouse
- Spouses of all these relatives
Gifts from Non-Relatives
Gifts exchanged between friends, cousins, or unrelated people are not exempt from tax, even if given with good intentions.
"This means the giver does not pay capital gains tax at the time of gifting."
Summary
While gifting assets can grow wealth, careful attention to tax laws is essential to avoid unexpected costs for both parties involved.
Would you like the summary to be more formal or conversational?