Equity Gifts For Children: Demat Transfer, Tax Implications & Capital Gains Explained
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Equity investors can gift shares to children via demat or physical transfer, with no tax for gifts from parents. Future dividends or capital gains are taxable for the recipient.
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Not many equity investors have an idea that they can transfer or share their equities to their children as a gift. Equities are usually held in demat account and could be bought and sold directly through it. The dematerialize form is a convenient way to invest in equity market without keeping physical certificates of equites in possession like in older times.
You can gift shares to your children. No stamp duty is charged if it’s a gift to a family member.
In this article, we explain how to transfer shares to your children, the tax implications, and what you need to know about capital gains when the gifted shares are eventually sold.
How To Transfer Shares To Children?
Demat Account Transfer:
- Both you and your child need active demat accounts (could be minor account if under 18).
- Fill a Delivery Instruction Slip (DIS) in your demat account.
- Mention your child’s demat account number and the number of shares to transfer.
- Submit to your depository participant (DP), like ICICI Direct, Zerodha, HDFC Securities, etc.
- Shares will be credited to your child’s account.
Physical Shares Transfer:
- Sign Share Transfer Form (Form SH-4).
- Attach original share certificates.
- Submit to the company registrar/transfer agent.
- The company will update the shareholding in your child’s name.
What Are Tax Implications Of Gifting Shares To Children?
According to Section 56(2)(x) of the Income Tax Act, gifts worth exceeding Rs 50,000 in one financial year will bear the tax. However, there’s a limit exemption when it comes to specified relatives such as parents. It means there will be no tax on shares gifted to children by parents.
However, in the future, if the child sells these shares, they would be liable to pay tax on capital gains (short-term or long-term) depending on the period of holding of the shares (listed or unlisted).
While computing the capital gains, the cost price will be the price at which the shares were originally acquired by the parent, and the benefit of the period of holding will also flow to the child, Darshika Thacker – Founding Partner at Thacker & Associates explains.
“For listed shares, special rules may apply based on the fair market value as of January 31, 2018 (grandfathering provision), which could influence the cost base if the parent’s acquisition was before this date,” Thacker added.
If you have received gifts like shares, ETFs, mutual funds, etc., and you decide to sell them, you would be taxed under Income from Capital Gains. You will have to file ITR-2 and pay taxes at applicable rates.
Varun Yadav is a Sub Editor at Business Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst…Read More
Varun Yadav is a Sub Editor at Business Business Digital. He writes articles on markets, personal finance, technology, and more. He completed his post-graduation diploma in English Journalism from the Indian Inst… Read More
October 09, 2025, 10:57 IST
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