Capital gain on stocks

1. Transfer of shares being securities by Sister to Brother is not taxable.
2. However if the brother subsequently sells them it will be taxable in his hands.
3. Cost of acquisition of previous owner can be taken.
4. Im assuming the shares not listed in a recognised stock exchange.

On recipt of shares from relative  there is no capital gains if you receive the same by way of gift or transfer on sale of shares you have to pay long term capital gains 

Dear Aditya,

Receipt of shares from brother or sister as gift is not considered as transfer in the hands of your brother or sister and also the gift is not taxable in your hand provided they are your own brother or sister.

In case, the related brother and sister are not own then the shares received will be taxable in your hand as gift, if the value of shares as on date of gift exceeds Rs 50,000/-.

In case of capital gain, if the shares are listed and stt is paid at the time of sale, then the gain is exempt in your hand.

However, if stt is not paid at the time of sale then the capital gain will be taxable in your hand @ 20%.

In both the above situation, the cost of shares in your hand will be:
If the shares received are not taxable as gift in your hand, then the cost of shares shall be the fmv of share as on 01.04.2001 or cost of previous owner whichever is higher.

If the shares received are taxable as gift in your hand, then the cost of shares shall be the gift amount on which tax has been paid.

Indexation benefit shall be available in computation of capital gain

If the aforesaid shares are trading in recognized stock exchanges in india, Those shares are subjected the security transaction tax (STT), therefore the capital gain arising from those shares are not liable to tax.                                                                         However, as per section 56(2) (VII)  any kind or cash received from the relative is not taxable. 

Dear Experts,

I am thanking to all very much for information provided.

In furtherance, after going to relevant provision of Income Tax Act (given below) and applying it in my case, I came to conclusion, as given below. All are requested to go through it and let me know your opinion on my conclusion and correct me wherever necessary.                                                       

 (1)     As per S-2 (29A) of Income Tax Act, the term “long-term capital asset” means a capital asset which is not a short-term capital asset. And as per S-2 (42A) of Income Tax Act, the “short-term capital asset”, in the case of a security listed in a recognized stock exchange in India, means a capital asset held by an assessee for not more than twelve months immediately preceding the date of its transfer. Hence, securities held for more than 12 months are “long-term capital asset”.

(2)      As per S-47 (iii) of Income Tax Act, any transaction of capital asset under gift is not regarded as transfer.  

(3)      As per S-56 (2)(vii)(c) of Income Tax Act, the Shares & Securities of any amount received from real / direct brother & sister is not taxable.

(4)      As per S-2 (42A) Explanation (i)(b) of Income Tax Act, the date of acquisition of Shares will be considered as that held by the previous owner.

(5)      As per S-10 (38) of Income Tax Act, such income will not included in total income which is arising from the transfer of a long-term capital asset, being an equity share in a company where such transaction is chargeable to securities transaction tax.         

My Conclusions:

(a) Since my direct brother & sister are gifting Shares to me, hence as per S-56 (2)(vii)(c) gift of any amount is not taxable.

(b) After receipt of those Shares as gift by me, from my real brother & sister, as per S-2 (42A) the date of acquisition of Shares will be considered as that held by the previous owner i.e. my brother & sister from 1980 & 1990 only.

(c)  As mentioned above in (b) since I will be considered to held Shares from 1980 & 1990, i.e. more than 12 months, hence as per S-2 (29A) & S-2 (42A) any gain from same would be long term capital gain to me even I sell it without holding it for one year.                           

(d) As per S-10 (38) long term capital gain, by paying STT, is not taxable.

(e) In view of aforesaid (a) to (d), if I dispose/sell Shares without keeping them for 1 year I will not have to pay any tax.