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Gift stocks allow investors to transfer ownership of securities to family members or loved ones as a financial asset, while ensuring compliance with depository and income tax regulations. Unlike traditional gifts, stocks can grow in value over time and may help the recipient build long-term wealth.
Understanding the process of gifting shares, including ownership transfer and tax considerations, is important to ensure that the transfer is completed smoothly and in accordance with market regulations.
Key Takeaways
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Stocks can be gifted by transferring shares from one demat account to another through an off-market transfer.
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Both the sender and the recipient must have demat accounts to complete the transfer electronically.
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Gifting shares does not attract capital gains tax for the giver at the time of transfer.
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Gifts exceeding ₹50,000 will be taxable for non-relatives under income tax rules.
Why Gift Stocks?
People may choose to gift stocks as a meaningful financial gift that can grow over time. Unlike traditional gifts, shares represent ownership in a company and may increase in value depending on market performance.
Gifting stocks can also introduce recipients to the basics of investing and long-term financial planning. For families, it may be a way to transfer wealth, encourage disciplined investing habits, and provide a gift that could benefit the recipient in the future.
Also Read: What are Stock Market?
How to Gift Stocks in India?
1. Demat Account Requirement
To gift stocks, both the sender and the recipient must hold demat accounts with a registered depository participant (NSDL or CDSL). These accounts store and manage securities in electronic form.
2. Initiate the Transfer Through the Broker.
Log in to your trading account and choose the option for share transfer or off-market transfer.
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Select the shares you want to gift.
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Enter the recipient’s demat account details and name.
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Enter the recipient’s demat account details, including DP ID and client ID.
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Review the information and submit the transfer request.
3. Authorisation and Processing
Some brokers may require a Delivery Instruction Slip (DIS) or digital authorisation to process the transfer. Once authorised, the shares are transferred through the depository system to the recipient’s account.
4. Completion of the Transfer
After authorisation, the shares are transferred from the sender’s demat account to the recipient’s account through the depository system.
Important Tax Points to Know
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Gift Tax: When shares are gifted, the sender is not subject to capital gains tax at the time of transfer. However, the total value of gifted shares may be taxed as income in the recipient's hands under Section 56(2)(x) of the Income Tax Act if the amount exceeds ₹50,000 and the receiver is not a designated relative.
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Capital Gains on Sale: Capital gains tax is applicable when the gifted shares are sold by the receiver. The sender's initial purchase price is treated as the cost of acquisition, and the sender's holding period is also taken into account in calculating taxes.
Can Physical Shares Be Gifted?
Since April 1, 2019, SEBI has banned the transfer of physical shares for listed companies. Instead, certificates must first be dematerialised before being gifted or transferred via demat.
For historical cases in which a physical transfer deed was executed before April 1, 2019, SEBI has established a special one-year window (5 February 2026–4 February 2027). These transfers will be completed and credited immediately in demat form, and the shares will be locked up for a year. You cannot use this route for new gifts today.
Therefore, for a normal gift, you should first demat the physical shares into your demat account before giving them to the recipient's demat account through an off-market transfer.
Gifting Stock Through a Broker
In most cases, shares are held electronically in a trading and demat account rather than in physical form. Investors who wish to gift stock can transfer all or part of their holdings to another person through an off-market transfer. This process is usually carried out through the broker or depository platform linked to the demat account.
To initiate the transfer, the sender must submit an off-market transfer request through the broker or depository platform. This is done using a Delivery Instruction Slip (DIS) or an electronic DIS (e-DIS) with OTP-based authorisation, as mandated by SEBI.
Sender’s Details
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Name of the account holder
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Demat account number (DP ID and Client ID)
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Details of the shares being transferred, including the company name and quantity
Recipient’s Details
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Name of the recipient
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Demat account number (DP ID and Client ID)Demat account number (DP ID and Client ID)
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Depository participant information
Once the request is verified and authorised, the shares are transferred electronically from the sender’s account to the recipient’s account.
Also Read: Ways to Find Demat Account Number & DP ID
Advantages Of Gifting Stocks
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Potential for long-term value: Gifting stocks allows the recipient to hold a financial asset that may appreciate over time. This makes it different from traditional gifts, as the value of shares can change based on market performance.
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Encourages financial awareness: Receiving shares can help individuals understand how the stock market works, including price movements, ownership, and long-term investing concepts.
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Flexible transfer of assets: Stocks can be transferred partially or fully through demat accounts without physical documentation. This provides greater flexibility in gifting than some other financial assets.
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No lock-in period: Equity shares generally do not have a lock-in period, allowing the recipient to hold or sell them based on their financial requirements.
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Efficient wealth transfer within families: Transfers to specified relatives are exempt from tax under applicable income tax rules.
Stocks Can Be Given As Financial Gifts
Stocks can be given as gifts to recipients who benefit from any price appreciation. Transferring stock from an existing brokerage account to a recipient's brokerage account requires an electronic transfer of the shares. Additionally, investors can purchase a single share of a stock through their broker's trading platform, depending on the share price.
A Single Share As a Gift
Additionally, you can gift a single share of stock, which can help spark a child's interest in the financial markets. Investors can purchase a single share of stock through their broker or trading platform, depending on the share price.
A share might be customised to a youngster's or adolescent's interests or activities. For instance, a single share of Nintendo or Sony could be handed to a young gamer. Gifting a single Disney share to a younger child can be a fun way to introduce them to stock ownership.
Also Read: How is Stock Price Determined?
Conclusion
The option to gift stocks allows you to transfer shares as a financial asset that may grow over time. By understanding how to gift stocks through demat accounts, broker transfers, or certificate transfers, investors can complete the process smoothly. Proper awareness of tax rules and transfer procedures helps ensure that gifted shares are handled correctly and recorded under the recipient’s ownership.
