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You can gift shares to a family member in India by doing an off-market transfer from your Demat account. Submit a physical Delivery Instruction Slip to your broker or use your broker’s online platform. Both parties need an active Demat account. Gifts to close relatives are completely tax-free at the time of transfer under the Income Tax Act. The process takes one to two working days if done online.

Table of Contents

  1. What Does Gifting Shares Actually Mean?
  2. Why Gift Shares Instead of Cash or Gold?
  3. Who Can You Gift Shares To?
  4. What You Need Before You Start
  5. How to Gift Shares Step by Step
  6. Real Example With Numbers
  7. Can You Save Tax by Gifting Shares?
  8. Tax Rules Explained Simply
  9. Transfer Charges: What You Will Actually Pay
  10. Advantages of Gifting Shares
  11. Risks and Things to Watch Out For
  12. Online vs Offline Method: A Quick Comparison
  13. Tips for First-Timers
  14. Common Mistakes People Make
  15. Who Should Consider Gifting Shares?
  16. Frequently Asked Questions

What Does Gifting Shares Actually Mean?

Gifting shares means moving stocks from your Demat account directly into someone else’s Demat account with no payment involved. No buying, no selling, just a transfer of ownership.

This is called an off-market transfer because it happens directly between two Demat accounts, not through the stock exchange (BSE or NSE). In India, all shares are held in electronic form through two depositories that are registered and regulated by SEBI (Securities and Exchange Board of India): CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited). Any transfer between Demat accounts, including a gift, must go through one of these two depositories.

Think of it like moving money from one bank account to another, except here you are moving shares instead of rupees.

Why Gift Shares Instead of Cash or Gold?

Most people still gift cash, sweets, or jewellery on weddings and birthdays. Shares are a less common gift in Indian families, but that is changing fast. Here is why more people are choosing shares as gifts:

  • They can grow in value. A gold chain stays a gold chain. Shares in a good company can multiply several times over many years.
  • They are fully paperless. No physical handover, no safekeeping, no bank locker needed.
  • They are tax-free when gifted to close family, as explained in the tax section below.
  • They build financial habits. Giving a young person shares in a real company is often what gets them started with investing.
  • Everything is tracked. Every rupee of value is recorded in the recipient’s Demat account.

Occasions where gifting shares makes great sense include weddings, Raksha Bandhan, children’s birthdays, retirement felicitations, and children going off to college.

Who Can You Gift Shares To?

You can gift shares to anyone who has a Demat account in India, whether they are family, a friend, or anyone else. The tax treatment depends on your relationship with that person.

The Income Tax Act defines a specific list of “specified relatives.” Gifts to people on this list are 100% tax-free for the recipient, regardless of how much the shares are worth.

Specified relatives include:

  • Spouse
  • Parents and parents-in-law
  • Children and their spouses
  • Brothers and sisters and their spouses
  • Grandparents and grandchildren
  • Any lineal ascendant or descendant of the individual
  • Any lineal ascendant or descendant of the spouse

If you gift shares to anyone outside this list, a cousin, a close friend, or a colleague, and the market value of the shares exceeds Rs 50,000 in a financial year, the recipient will owe tax on the full fair market value under Section 56(2)(x) of the Income Tax Act.

What You Need Before You Start

Before initiating a share gift transfer, keep the following information ready.

From your side (sender):

  • Your DP ID and Client ID (your Demat account number, visible on your broker’s app)
  • ISIN number of the shares you want to gift (a unique code for each listed company, found in your Holdings section)
  • Your CDSL TPIN or NSDL login credentials

From the recipient’s side:

  • Their full name
  • Their DP ID and Client ID
  • Their PAN number
  • Their registered mobile number

Documents recommended:

  • A gift deed: a simple written document stating you are voluntarily gifting the shares. It is not legally mandatory, but it protects both parties if the income tax department raises questions. Get it signed, dated, and keep a copy safely.
  • PAN card copies of both the sender and the recipient

One thing many people miss: the recipient must have an active Demat account before the transfer begins. If they do not have one, ask them to open a free Demat account with Alice Blue and complete eKYC in just 15 minutes. The transfer cannot proceed without an active Demat account on the recipient’s side.

How to Gift Shares Step by Step

There are two methods: online (faster) and offline (physical form-based). Both are equally valid.

Online Method (Recommended)

  1. Log in to your broker’s trading app or web platform, such as the Alice Blue ANT platform
  2. Go to your Holdings section and select the stock you want to gift
  3. Click on “Gift” or “Transfer” — this option is available on most modern broker platforms
  4. Enter the recipient’s name, PAN number, Demat account ID, and registered mobile number
  5. Choose the quantity of shares and confirm
  6. The recipient receives an SMS and email notification to accept the gift and must do so within 7 days
  7. You will be asked to authorise the transfer using your CDSL TPIN — a 6-digit security PIN issued by CDSL to authenticate Demat transfers. You can set or reset it through your broker’s portal or directly on the CDSL website.
  8. CDSL sends an email and SMS to confirm the off-market gift transaction at 5 PM on the same trading day. You must complete the OTP verification before 8 PM on the same day. If you miss this window, the transfer request lapses, and you will need to restart the process.
  9. Once both sides complete verification, shares are credited to the recipient’s Demat account by the next trading day

Offline Method (Physical DIS)

  1. Visit your broker’s branch or Depository Participant office and collect a Delivery Instruction Slip booklet
  2. Fill in the DIS with the recipient’s name, DP ID, Client ID, ISIN number of the shares, number of shares, and write “gift” in the purpose or remarks field. A single DIS form can carry a maximum of five securities (ISINs). Use a supplementary DIS Annexure form if you are transferring more than five.
  3. Submit the filled DIS along with copies of your PAN and the recipient’s PAN to your Depository Participant
  4. The recipient must give a receipt instruction to their own DP to accept the incoming shares, unless they already have a standing instruction in place
  5. Shares appear in the recipient’s account within 2 to 4 working days after the DP processes the instruction

Real Example With Numbers

Here is a straightforward example showing how the numbers work.

Situation: Suresh (father) holds 200 shares of Infosys Ltd. He originally bought them at Rs 1,400 per share. His total cost was Rs 2,80,000. He wants to gift these shares to his son Aakash on his 25th birthday. The current market price of Infosys at the time of the gift is Rs 1,800 per share.

Detail

Value

Shares gifted

200 shares of Infosys

Suresh’s original purchase price

Rs 1,400 per share

Market price on the day of gifting

Rs 1,800 per share

Total market value of the gift

Rs 3,60,000

Tax for Suresh (sender)

Rs 0 — gifting is not a taxable event under Section 47(iii)

Tax for Aakash (receiver)

Rs 0 — gift received from a specified relative (father)

Transfer charge (CDSL flat fee)

Rs 25 per ISIN plus 18% GST = Rs 29.50 total

Now, three years later, Aakash sells all 200 shares at Rs 2,400 per share.

  • Cost of acquisition used for tax purposes: Rs 1,400 (Suresh’s original purchase price, not the gifting price of Rs 1,800)
  • Holding period: Counted from the date Suresh originally bought the shares, not from the gift date
  • Capital Gains: (Rs 2,400 minus Rs 1,400) multiplied by 200 shares = Rs 2,00,000
  • Since the total combined holding period (Suresh’s period plus Aakash’s period) exceeds 12 months, this qualifies as Long-Term Capital Gains (LTCG)
  • LTCG above Rs 1,25,000 is taxed at 12.5% (confirmed unchanged in Union Budget 2026)
  • Aakash pays tax on Rs 75,000 (Rs 2,00,000 minus the Rs 1,25,000 exemption) = Rs 9,375 in tax

This is why Suresh must share his original purchase price and purchase date with Aakash at the time of gifting.

Can You Save Tax by Gifting Shares?

Yes, and this is something most people are not aware of. Gifting shares to certain family members can genuinely reduce your family’s overall tax burden.

Gifting shares to parents (if they are in a lower tax bracket):

If your parents have little or no other income, their income tax slab rate will be lower than yours. When you gift shares to them, any future dividends or capital gains on those shares are taxed in their hands at their lower slab rate, not yours. This is completely legal and is a well-known tax planning strategy used by many Indian families.

For example, if you are in the 30% tax bracket and your mother is a homemaker with no other taxable income, dividends on shares gifted to her would be taxed at 0% or at a much lower slab rate in her hands instead of 30% in yours.

Gifting shares to your spouse — an important warning:

Gifting shares to your spouse does not help with tax savings. Under Section 64 of the Income Tax Act, any income earned from assets gifted to a spouse, such as dividends, is clubbed back with the donor’s income and taxed in the donor’s hands. Capital gains on the sale of such shares are also clubbed back in most situations.

Gifting to parents can offer a genuine tax benefit. Gifting to a spouse generally does not.

Tax Rules Explained Simply

Here is the complete tax picture for share gifting in India, governed by the Income Tax Act, 1961, the primary legislation under which all gift-related tax rules are framed.

For the sender:

You pay zero tax when you gift shares. Under Section 47(iii) of the Income Tax Act, gifting is not treated as a “transfer,” so no capital gains tax applies to you at the time of the gift.

For the recipient at the time of receiving the gift:

  • Gift from a specified relative: completely tax-free, no limit on value
  • Gift from a non-relative where the fair market value exceeds Rs 50,000: the entire fair market value is taxable as “Income from Other Sources” at the recipient’s applicable income slab rate, ranging from 5% to 30%, plus 4% Education Cess and applicable surcharge

For the recipient, when they eventually sell the gifted shares:

  • Capital Gains Tax applies at the time of sale
  • The cost of acquisition is the original price the donor paid, not the market price on the date of gifting
  • The holding period is counted from when the original owner first purchased the shares
  • If total holding period exceeds 12 months: Long-Term Capital Gains taxed at 12.5% above Rs 1,25,000 per year (unchanged in Union Budget 2026)
  • If the total holding period is 12 months or less: Short-Term Capital Gains are taxed at 20%
  • File ITR-2 when reporting gains from the sale of gifted shares. ITR-2 is the income tax return form for individuals who have capital gains income.

Keep all purchase records. The recipient should hold on to the original purchase price, the purchase date, and the gift deed. These are needed when filing taxes after selling the gifted shares.

Transfer Charges: What You Will Actually Pay

CDSL charges a flat fee of Rs 25 per security (per ISIN) per transaction, plus 18% GST. This charge is based on the number of different company shares being transferred, not the number of shares or the total value of the transaction.

Here is what this means in practice:

What You Are Gifting

CDSL Charge

GST at 18%

Total Cost

200 shares of one company (1 ISIN)

Rs 25

Rs 4.50

Rs 29.50

Shares of two companies (2 ISINs)

Rs 50

Rs 9.00

Rs 59.00

Shares of three companies (3 ISINs)

Rs 75

Rs 13.50

Rs 88.50

In addition to the CDSL fee, your Depository Participant may charge their own processing or handling fee separately. This varies from broker to broker, so check with your DP before initiating the transfer. The CDSL charge remains the same whether you gift 10 shares or 10,000 shares of the same company, as it is charged per ISIN and not per share.

Advantages of Gifting Shares

  • Tax-free for close family at the time of gifting: No tax applies to the recipient when shares are received from a specified relative, regardless of the value of the gift
  • Long-term wealth that can grow: Shares of well-run Indian companies can appreciate over the years, making this a financially meaningful gift
  • No stamp duty in most cases: Unlike property transfers, gifting shares generally does not attract stamp duty when there is no monetary consideration involved
  • Fully digital and traceable: The entire process is electronic, with a clear record maintained in both Demat accounts
  • Works for minor children: A child can receive shares through a guardian-operated Demat account, giving them an early start in investing
  • Useful for estate planning: Distributing shares to family during your lifetime avoids the legal complexity of post-death succession for the assets in question

Risks and Things to Watch Out For

  • The recipient will pay tax when selling: The recipient inherits your original cost basis. If shares have appreciated significantly since you first bought them, the tax bill for the recipient on eventual sale could be large. Make sure they know this upfront.
  • Market risk passes to the recipient immediately: Once shares are credited to the recipient’s account, any fall in price is their loss to bear.
  • Spousal gifting and clubbing of income: Dividends and capital gains on shares gifted to a spouse are taxed in the donor’s hands under Section 64. Many people miss this and receive an unexpected tax notice. Always consult a tax advisor before gifting to a spouse.
  • No reversal once accepted: After the recipient accepts the transfer, it is permanent. You cannot take the shares back unless the recipient voluntarily transfers them to you again.
  • Wrong account details cause failed transfers: A single wrong digit in the recipient’s DP ID or Client ID can cause the transfer to fail or be misdirected. Always verify the details before confirming.
  • ELSS mutual funds cannot be gifted during the lock-in period: If you hold units in an Equity Linked Savings Scheme (ELSS) fund, they are locked in for 3 years and cannot be transferred during that period.
  • Pledged shares cannot be gifted: Shares pledged against a margin loan cannot be transferred. You must release the pledge first before initiating a gift.

Online vs Offline Method: A Quick Comparison

Parameter

Online Method

Offline (DIS) Method

Where do you do it

Broker’s app or website

At the broker’s branch or DP office

Time to complete

1 to 2 working days

2 to 4 working days

Documentation

Digital form plus CDSL TPIN and OTP

Physical DIS form plus PAN copies

OTP deadline

Must be completed before 8 PM on the same day

Not applicable

Maximum ISINs per form

No restriction on the digital platform

5 ISINs per DIS form (use supplementary form for more)

Tracking

Real-time SMS and email updates

Manual follow-up with the broker needed

Best suited for

Quick, routine gifting

Large, formal, or legally sensitive transfers

Transfer charges

Rs 25 per ISIN plus 18% GST

Rs 25 per ISIN plus 18% GST

Tips for First-Timers

  • Always prepare a gift deed. Even though it is not legally required, it is your first line of protection if the income tax department ever questions the transfer. Get it signed, dated, and keep a copy with your tax records.
  • Share the original purchase details with the recipient. Tell them what you paid for the shares and on which date you bought them. They will need this information when they file taxes after eventually selling.
  • Do not gift shares bought on the same day. Shares need to settle in your Demat account first under the T+1 settlement rule. Only gift shares that are already showing in your Holdings section.
  • Double-check the recipient’s Demat account details before confirming. Ask them to share a screenshot of their DP ID and Client ID from their broker app rather than writing the numbers down by hand.
  • Start the online transfer process in the morning, not late in the evening. You need to complete the CDSL OTP verification before 8 PM on the same day.
  • If gifting to a minor, ensure the child’s guardian-operated Demat account is already set up before you initiate the transfer.
  • If you hold shares in an ELSS fund, check whether the 3-year lock-in period has passed before attempting a transfer.

Common Mistakes People Make

  1. Not preparing a gift deed. Without a document showing the transfer was a gift, the income tax department may treat it as a sale and raise a capital gains tax demand on you. A one-page signed document prevents this problem entirely.
  2. Gifting to a spouse expecting a tax benefit. Dividends and gains on shares gifted to a spouse are added back to your income under Section 64. The tax savings many people expect simply do not materialise. Talk to a tax advisor before gifting shares to your spouse.
  3. Not telling the recipient about the cost of acquisition. The recipient uses your original purchase price to calculate their future capital gains. If they do not have this number, they cannot file their taxes correctly when they sell.
  4. Trying to gift pledged shares. Shares under a margin pledge cannot be transferred. Release the pledge first, confirm the release is reflected in your Holdings, then initiate the gift.
  5. Assuming all relatives qualify as specified relatives. A cousin, an aunt, an uncle, and a close friend do not fall under the defined list of specified relatives under the Income Tax Act. Gifts to these individuals of over Rs 50,000 in a financial year are taxable for the recipient.

Missing the 8 PM OTP window. If you initiate the online transfer late in the day and miss the 8 PM CDSL OTP deadline, the transaction lapses entirely, and you have to begin again from scratch.

Who Should Consider Gifting Shares?

Gifting shares is a good fit for these situations:

  • Parents who want to give their children a head start in investing. Gifting quality shares to a son or daughter in their early 20s can form the foundation of their long-term portfolio.
  • Grandparents who want to give a financially lasting gift on milestones like board exam results or college admissions.
  • Investors doing estate planning who want to distribute shares among family members during their lifetime in a clean, documented way, instead of leaving it to be settled through succession after death.
  • High-income earners who want to shift dividend income to parents in a lower tax bracket and reduce the family’s overall tax outflow.

It is less suitable for:

  • People who are still building their own portfolio and cannot afford to part with the shares
  • Anyone holding shares that are pledged against a margin loan and has not yet released the pledge
  • Anyone trying to gift ELSS mutual fund units that are still within the 3-year lock-in period

Conclusion

Gifting shares through a Demat account is one of the most financially meaningful things you can do for a family member. The process is fully digital, clearly documented, and takes no more than a working day or two when done online. Gifts to close relatives are entirely tax-free at the time of transfer under the Income Tax Act. The two things most people skip but should never skip are preparing a gift deed and sharing the original purchase price with the recipient. Both of these matter when taxes come into the picture later.

If you’re planning to start investing, you can open a demat account with Alice Blue and get started.

Frequently Asked Questions

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When you sell shares, you receive payment and pay capital gains tax on the profit. When you gift shares, no money changes hands and there is no capital gains tax for you at the time of transfer. The ownership moves from your Demat account to the recipient’s account, and any future tax on gains is owed by the recipient when they eventually sell.

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No. The recipient must have an active Demat account before the transfer can happen. You may prepare all the paperwork, but the actual transfer cannot be completed until the recipient has a valid Demat account with a registered broker. Ask them to open one first, then proceed.

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A gift deed is not a legal requirement under Indian law for movable property like shares. However, it is strongly recommended because it serves as documentary proof that the transfer was a voluntary gift and not a disguised sale. If the income tax department ever raises a query about the transaction, a signed and dated gift deed is your clearest answer.

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TPIN stands for Transaction PIN. It is a 6-digit security code issued by CDSL that you use to authorise Demat transfers from your account. It exists to prevent unauthorised movement of shares. You can set or reset your TPIN through your broker’s platform or directly on the CDSL website. For online gift transfers, you must complete the TPIN and OTP verification before 8 PM on the same day the transfer is initiated.

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The recipient pays capital gains tax based on the original price the donor paid, not the market price on the date of gifting. The holding period is also counted from when the original owner bought the shares. If the total holding period exceeds 12 months, the gains are Long-Term Capital Gains taxed at 12.5% above Rs 1,25,000 per year. If the period is 12 months or less, they are Short-Term Capital Gains taxed at 20%. The recipient should file ITR-2, which is the income tax return form for individuals with capital gains income.

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