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CA Advice needed

KJS (NA) (102 Points)

22 December 2020

A friend would like to have the following answered:

>>>>>> I wish to gift shares to my parent (retired with no pension) to avail the dividend as income. I have a few questions related to it.

1. Will a Gift Deed need to be made? Will it need to be registered?

2. Will my parent be taxed?

3. Can my parent gift or will back the shares to me at a later date? Can a HUF structure be helpful in this matter?

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6 Replies

Sivaramaraju G (Learner) (2398 Points)
Replied 22 December 2020

1. for future purpose if any income tax issues arise in future to defend well better to have a deed.
2. not taxed in your parents as it is a gift to close relative. and dividend income will be taxable in your parents hands.
3. I think yes but its not fair to taken back a gift from your parents😁😁

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KJS (NA) (102 Points)
Replied 22 December 2020

1. Registered gift deed OR will non-registered one do just as well?

3. My friend has 2 siblings and he is worried that there could be a claim later on his hard earned shares. He is also concerned that, just in case, he ever requires the money in an emergency ....

ajmer alam (19 Points)
Replied 22 December 2020

1. It's a better to made a gift deed, i will recommend you to transfer the shares with gift deed

2. N0! as per the tax law transfer of property to the relative are not taxable

3. Obviously your parents can gift to anyone.

queryinsta054@gmail.com (234 Points)
Replied 22 December 2020

1. Legally, only a registered Gift deed is considered to be valid.
2. If the transfer to the 2 siblings/money in case of emergency be your friend's concern, then he should gift the dividend income to his parents but keep the shares with him because in the gift deed, if he barrs his parents from transferring the shares or keeps any kind of control on the shares, then it will cease to be a gift and would become a revocable transfer on which clubbing of income provisions would get attracted depending on the conditions of revovability

KJS (NA) (102 Points)
Replied 22 December 2020

Originally posted by : queryinsta054 @ gmail.com
	1. Legally, only a registered Gift deed is considered to be valid.2. If the transfer to the 2 siblings/money in case of emergency be your friend's concern, then he should gift the dividend income to his parents but keep the shares with him because in the gift deed, if he barrs his parents from transferring the shares or keeps any kind of control on the shares, then it will cease to be a gift and would become a revocable transfer on which clubbing of income provisions would get attracted depending on the conditions of revovability

In case, a "transfer barring clause/ reverse gift" is ruled out, can a HUF structure be used for the purpose?

(My friend is based abroad but has the option to remain an Indian resident)

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queryinsta054@gmail.com (234 Points)
Replied 23 December 2020

While a HUF has some tax benefits, points to be noted esp. in this particular case is that the HUF pooled properties can be sold/disposed off only after consent of ALL the members and also that the HUF can be dissolved with consent of ALL the members