Want To Gift Stocks To Your Spouse? Know How They Are Taxed Under The Gift Tax Act (GTA) Of The Income Tax Act.

Spouse falls under the category of a specified relative, indicating they are not liable to pay tax on gifted shares as per Gift Tax Act (GTA).

Any share given as a gift to a spouse or any specified relative is not subject to tax. A spouse is a 'relative' under the Income Tax Act. A gift in the form of money, shares, ETFs, mutual funds, or immovable property is not liable for taxes in the hands of the sender. Moreover, gifts from a spouse or relative regarding marriage, inheritance, or death are exempt from tax. 

Highlights: 

• A spouse is defined as a 'relative', which exempts her from paying taxes on gifted shares received from her husband. 

• The sender of the gift is also not liable to pay any tax on gift shares, as per the Gift Tax Act (GTA). 

• However, if your spouse sells the gift and earns any income, it would attract capital gains tax on gifted shares.

Also Read: Tax implications in India on receiving gifts from family.

Tax implications on gift sender 

The sender of the gift is not liable to pay any taxes, according to the Gift Tax Act (GTA). However, capital gains tax may arise on the transfer of assets, but the 'gift' is excluded from share transfer u/s 47. Thus, the sender is not liable to pay tax on gifted shares. 

Tax implications on the gift receiver

If the receiver receives any gift worth more than Rs. 50,000 from friends or unspecified relatives, they are liable to pay tax u/s 56 (2) (vii). Any income from such gifts must be reported under income from Other Sources and taxed on tax slab rates.  

Following are the conditions when the tax on gifted shares is exempt: 

• Receiving gifts from relatives (spouse, and siblings) 

• On occasion of marriage, inheritance, and death. 

Tax implications on the sale of gifts 

If a gift received from a spouse is sold, income earned from it attracts capital gains tax. For the sender, the sale of shares and securities is not taxable. For the receiver, capital gains tax on gifted shares is taxable under income from Capital Gains. 

Also Read: Clubbing of income: Transferring shares to spouse? 

How to calculate income tax for gifted shares 

To calculate the tax on gifted shares, find a holding period of the shares by determining their Capital Gains nature, and whether it is short-term capital gains (taxed at 15%) or long-term Capital Gains (taxed at 10%). The holding period is the duration between the date of acquisition and date of sale. 

You need to present proper documentation, like a gift deed, to prove the genuineness of your gift transaction. Both sender and receiver must maintain a receipt of the transaction to avoid tax evasion charges, especially when it is a high-amount gift. 

Find the latest article on tax planning here.