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How To Transfer Or Gift Shares In Demat Form

stock market
30 Aug 20216 mins readBy MOFSL

As of 1 April 2019, shares may be gifted in Demat form, and the legal term is known as the ‘Transfer of Shares’. When you want to transfer shares, you are known as the ‘donor’ and the person who receives the gift is known as the ‘donee’. According to the Income Tax Act, gifts you give to a close relative are non-taxable. Nonetheless, if you want to give a gift of shares to a non-relative, what you gift, shares from a Demat account, will be taxable if the value exceeds Rs. 50,000 in a year. 

  • What is the Procedure for Transfer of Shares?

When you hold a bank account, you may get a free demat account in case you need one. This is where shares are held, linked to a trading portal through which you can buy and sell shares. You may think of giving your relatives a gift. Shares are a good way to start youngsters on an investment journey. This is how you can transfer shares:

  1. Do an Off-Market Transaction - Since you are the donor, you have to commence an Off-Market Transaction. What this translates to is a settlement of shares among two parties, done mutually, without the involvement of the stock exchange. You have to submit a delivery instruction slip to your Demat account provider (DP or depository participant) to transfer shares from your Demat account (donor account) to the donee’s Demat account. You can do this through an online demat account. 
  2. Details to be Filled - The delivery instruction slip book has to be filled in with certain details, such as:
  • Name of the person receiving the gift of shares
  • Details of the donee’s account
  • Stock or share to be transferred/gifted
  • The company’s ISIN number
  • The amount of shares to be given as a gift
  1. On the Donee’s Part - The person receiving the gift has to give a receipt of instruction to their own Demat provider (DP) to accept the shares that are received. The donee may also give a standing instruction to their DP. 
  2. Gift Deed - For legal purposes, and in the event of an income tax - related enquiry, it is recommended that donors of gifts execute a gift deed on legal stamp paper when a transfer of shares is undertaken. 

To End With

The transfer of shares from an online demat account is possible, but you may have to physically fill out delivery instruction slips and submit them. Also, once a gift of shares is executed, it can’t be cancelled. You can find out more at Motilal Oswal, giving you the best in financial services. 

 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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