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How To Transfer Or Gift Shares In Demat Form

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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