I'm looking at transferring some of the shares of an unlisted company in India to my mother. I have held these shares for 5 years. Let us say the cost of acquisition of shares is Rs 100. Current fair market value [FMV] is Rs 150. I am a UK resident and liable to both UK and India taxes with benefit of double taxation. I am very clear on my UK taxation - irrespective of whether I gift the shares to my mom or sell them to her at fair value, in both cases UK tax authorities will charge capital gains as if the asset is disposed off at fair value and hence Rs 50 will be the capital gains for purpose of capital gains tax in UK [UK doesn't deem transfers to parents/siblings as gifts]. Let's assume my mother holds these shares for 2 years after the transfer and price is unchanged at Rs 150 and she decides to sell it. What I want to know is tax implications for my mom in the following scenarios:
A) I give it to her as a gift today: Her acquisition price will be deemed to be Rs 100. She will pay LTCG [long term capital gains] at 12.5% on Rs 50. Additionally I would have paid capital gains tax in UK on Rs 50 at the time of transfer so we get double taxation - one for me and one for my mom
B) I sell it to her at 150 instead of gifting: I pay LTCG at 12.5% in India and any remaining capital gains I need to pay in UK. However, my mom's cost of acquisition is 150 and on selling she has 0 capital gains.
My question is can I transfer shares to her today with no cash exchange but still treat it as selling to her at 150. I am happy to pay capital gains right now in this case. But is it possible to treat cost of acquisition as 150 for my mom even if no cash exchanged and contingent on I having paid capital gains in india today. Basically, is there any other way to show a consideration of Rs150 without doing an actual cash transfer
CAclubindia
