Can shares be gifted to members of the family or to a HUF?

Can we reward shares to another members of the family (Sister or HUF)? In that case, will the dividend be taxable to us or to them? Can HUF or sister once more reward again us the shares when required? Is there any frequency on which what number of occasions we are able to reward? What is one of the best ways to save lots of tax on dividend from unlisted public restricted firm?

-Name withheld 

(Query answered by Rishabh Shroff, accomplice, Cyril Amarchand Mangaldas)

Since your question is unclear, now we have assumed that you’re desirous of both gifting shares to your sister or your HUF. We have additionally assumed that you’re the karta of the HUF.

A present of shares to your sister in addition to the HUF can be tax exempt as it might be categorized as ‘property received from a relative’ which is particularly exempt on account of part 56 (2)(x) of the Income Tax Act, 1961 (“IT Act”). Any dividend obtained on such shares can be taxed within the palms of your sister after such a present of shares. However, it’s pertinent to be conscious of the anti-avoidance provisions beneath the IT Act could also be attracted.

Alternatively, if any asset (i.e. shares in your case) held in a person capability is transferred by the use of a present to the HUF, the identical can be thought-about as earnings of the person even after such switch. However, please be aware that reward of belongings to the HUF could entice clubbing provisions beneath the IT Act.

We advocate consulting a practising tax legal professional or a chartered accountant to help you with efficient tax planning methods.

(Send your queries and views at mintmoney@livemint.com)

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