Rs 30 lakh shares gifted to father: Report in ITR?
Son gifts Rs 30 lakh worth shares: Should father disclose this in his income tax return? ITR reporting for shares gifted by son to his
Son gifts Rs 30 lakh worth shares: Should father disclose this in his income tax return? ITR reporting for shares gifted by son to his father What documentation must be kept for gifts received from relatives? Transaction appears in AIS; what taxpayers must do to avoid future tax notices? Verify the transaction details in AIS; Retain supporting documents such as gift declaration/deed, demat transfer instruction, CDSL/NSDL transaction statements, relationship proof, if required. Is double reporting by CDSL and the mutual fund/RTA common? How to handle this? A son, who moved abroad for work, transferred shares worth Rs 30 lakh to his father through an off-market transfer, which he had bought with his salary income over the years. The man did so thinking that he shouldn't continue holding a resident demat account after becoming an NRI, the person posted on Reddit.However, what surprised him was the Rs 34 lakh value in his AIS. This, he believes, have been double reported once by the mutual fund/RTA and once by CDSL. In such a scenario, does the father need to report the same in his income tax return, even though gifts from such relatives are ta exempt?It is known that gits from specified relatives are exempt from tax. Since a son falls within the definition of a “relative”, the receipt of shares by the father would not be taxable irrespective of the value of shares transferred, Preeti Sharma, Partner, Global Employer Services, Tax & Regulatory Services, BDO India, told ET Wealth Online.Being ta exempt, however, is not the same as being invisible to the tax department. “A credit of Rs 30-34 lakh landing in his account, unexplained, is disproportionate to his declared income profile and is exactly the kind of gap that CPC's automated matching flags for scrutiny,” underlined CA Kanika Bali, Founder, The Tax Planet.So yes, the father needs to ideally disclose the share transfer in his ITR, even though it is ta free.Although a genuine gift of shares from a son to his father is not regarded as a transfer for capital gains purposes in the hands of the donor, the reporting of such off-market transactions in the Annual Information Statement (AIS) often creates uncertainty, shared Mukul Bagla, Chair-Direct Taxes Committee, PHDCCI.Experts point out that there is no requirement to offer the value of the gift to tax.
But as a matter of prudence, regardless of the transaction value and whether such amounts are reflecting in AIS or other information statements, taxpayers may consider making an appropriate disclosure.Sharma said that the same can be disclosed in Schedule EI or exempt income.“This isn't optional bo ticking. It's what creates a paper trail that matches the AIS entry to a declared, exempt source. If a taxpayer simply leaves the entry unaddressed and files a return that doesn't account for it anywhere, the AIS shows an unexplained high-value credit sitting against a return that's silent on it,” added Bali.The tax implications in such cases generally arise only when the receiver subsequently sells the shares. Capital gains will generally be computed with reference to the original cost and holding period of the son, subject to applicable tax provisions.Additionally, the father should preserve adequate documentation such as:• Gift deed or gift declaration.• Off-market transfer instruction/Delivery Instruction Slip (DIS).• Demat account statements reflecting the transfer.• Proof of the relationship between donor and donee, if ever called for.These documents would help explain the transaction if the tax department seeks clarification in future, stated Bagla.Action needs to be taken on both sides since AIS mismatches are one of the most common triggers for routine tax notices. This is not because the underlying transaction is wrong, but because the return doesn't explain what AIS is reporting, explained Kanika Bali.Two things are worth doing in such cases:Father should use the AIS feedback facility on the income tax portal to respond to the specific entry - flagging it as "duplicate" if there are two entries for the same transaction and adding a note where the portal allows it.Both father and son should keep documentation ready even though it isn't attached to the income tax return: a simple gift declaration or letter noting the relationship, the nature of the asset, the date of transfer, and that it was made without consideration; the off-market transfer instruction/CDSL statement; and, on the son's side, evidence that the shares were originally bought from disclosed, taxed income.According to Preeti Sharma, the taxpayer should:As a thumb rule, even if it’s a gift from a specified relative, compare the AIS with own records; if the value or nature of the transaction is incorrectly reflected, submit feedback through the AIS portal indicating the appropriate reason; and retain supporting documents.Such instances are not uncommon.
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