What is more Beneficial: Giving Gift of Shares/Property or Gift of Money to the children from Tax Perspective

We will discuss this question of general curiosity with the help of a Case Study

Ram Purchased shares of ABC Ltd in 2020 for Rs.500000.

Now in 2024, value of these shares is Rs.10 Lakhs

Ram wants to give Rs. 10 Lakhs to his daughter on her marriage as gift.

Now, question is what is more beneficial from Tax Perspective, whether to Sale the shares and give the money to the daughter or give the shares itself as gift.

In case money is given

In the hand of Ram

Ram need to pay Capital Gain Tax on Sale of Shares.

In the hand of Daughter

As per section 56(2), as a general rule, Gifts in excess of Rs. 50000 in a year are taxable in the hand of the Receiver. However, among other exceptions, Gift to Daughter is not taxable in the hand of Daughter.

Therefore, no Tax at the time of receipt of Gift.

In case Shares is given

In the hand of Ram

There is no Tax in the hand of Ram.

In the hand of Daughter 

As explained above, no Tax at the time of receipt of Gift.

Further, at the time of Sale by Daughter in future, though shares received as Free of Cost, cost in the hand of daughter will be considered as Rs. 5 Lakhs for the purpose of Calculation of Capital Gain. (Section 49). The same will be applicable in case of Property also.

Further, period of holding in the hand of Father will also be considered i.e. it will be assumed that Shares/Property is being hold by the daughter from 2020 for the calculation of Capital Gain.

Conclusion: If Daughter is not in need of money immediately, it is better to give gift of Shares/Property from Tax Perspective.

Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.