Photos: Pixabay/Pexels
Written By: Rajeev Kumar
Infosys co-founder Narayana Murthy recently gifted shares worth Rs 240 crore to his 4-month-old grandson. Do you think the gift will be subject to tax? Read on to find out...
Well, knowing the rule for taxation of gifting of shares to relatives can help if you plan to do something like Narayana Murthy in future, even at a smaller scale!
As per Income Tax Act, gifts from relatives are not taxed, irrespective of their monetary value. But gifts from non-relatives are taxed if the aggregate value is more than Rs 50,000 annually.
But, who is a relative under the Income Tax rules? To understand this, let's suppose there is a couple Viplav and Karishma.
Viplav's relatives will be his a) spouse (Karishma), b) his brother or sister, c) Karishma's brother or sister, d) brothers or sisters of his parents, e) any lineal ascendant or descendant of Viplav or Karishma, and spouses of b), c), d) and e)
Lineal descendants include children, grandchildren. Lineal ascendants include blood relatives such as parents, grand parents and great grand parents.
So from the facts mentioned in previous slides, it is clear that no tax incidence will arise if a grandfather gifts shares to grandchild.
So in Narayana Murthy's case too, there will be no tax in the hands of his grandchild. However, any income from the shares in future will be subject to tax.
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