Gifts to relatives as defined by the Income Tax Act are not taxed. Non-relatives are taxed only if the value of the gift exceeds 50,000 rupees per year.
When it comes to gifts, some people don't get in the way of giving useful items. If you are in the stock market, you often donate stocks or trusts to your loved ones or simply add them to their existing portfolio to help them embark on their investment journey. You would have thought. However, the process for doing so is very complicated. Simplifying the same, digital brokerage company Zerodha has announced a digital platform for giving stocks, ETFs, and gold bonds to friends and loved ones.
"One of the things I've always wanted to do with Zerodha was to make it easy to donate stocks, trusts, and bonds, but I couldn't make the process seamless and online. The recently introduced CDSL Thanks to e-DIS (electronic delivery instructions), we have now built a platform for giving stocks, ETFs, and gold bonds to your friends and loved ones, "said Zerodha's founder and CEO. Said Nithin Kamath.
Otherwise, you will need to donate shares or bonds, but the process is completely physical. Donors must complete a Delivery Instruction (DIS) and submit it to the Depositary Participant (DP). The DIS contains details such as the donor and Donnie names and DP ID, client ID, and the number of shares to transfer. The date of transfer must also be stated. Sending a DIS will perform the transfer on the specified date. However, the shares are still in Donnie's DP. Now, Donnie has to fill out the receipt instructions and submit them to his DP. When that happens, the shares received from the donor's DP will be credited to Donnie's Demat account.
What the Zerodha platform offers
What Zerodha has done is move physical processes to digital platforms. However, unlike the physical process of transferring shares to any securities account, Zerodha requires both the donor and Donnie to have a Zerodha account.
"The sender simply enters the recipient's mobile number, confirms the recipient's Demat account details, and approves the transfer of shares. If the recipient does not have a Zerodha account, several times. You can open your account completely online. You will receive the gift in a few minutes, "Zerodha said in a press release.
How to give an investment trust
Donating an investment trust is also not an easy process. Most trust schemes do not allow investment or payments (either lump-sum payments or SIP) through a third party. If you do that for a minor, you will again need the details of the minor's parent's account. "Only possible through a parent or legal guardian who is required to have a minor bank account (joint account of minors and parents). Schemes that allow you to receive investment, such as HDFC Children's Gift Fund and ICICI Pru Child Care Fund. Is very limited. A third party (donor) whose parents or legal guardians have access to minor bank accounts, "said Suresh Sadagopan, founder of Ladder7 Financial Advisories.
"Another important thing is that the investment mode of holding must be similar to holding a minor bank account. In the case of MF investment where the father is the guardian, he is the guardian of the bank. We need to make sure, "adds Sadagopan.
Zerodha says they will soon be able to donate investment trusts to minors.
Tax application for gifts
Gifts to relatives as defined by the Income Tax Act are not taxed. Non-relatives are taxed only if the value of the gift exceeds Rs 50,000 per year.
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