Stocks, Mutual Funds Gift: Taxable or Not? Experts Explain

India's financial literacy has taken a different turn in the last decade with the investment habits have changed to an extent that gifting financial assets such as shares and mutual funds is increasingly being used as a tool for wealth transfer and financial planning. The gifting has ranged from parents transferring blue-chip shares to children, to investors passing on mutual fund units as part of estate planning, financial gifting is gaining momentum.

However, one wrong move could trigger unexpected liabilities, and it is crucial to understand that when you gift stocks or mutual funds, who really pays the tax — the giver or the receiver?

Taxation on the transfer of equity shares or mutual fund holdings depends on whether the transfer is made to immediate relatives, such as spouse, parents or children.

Kumarmanglam Vijay, Partner and Head of Practice - Direct Tax, JSA Advocates & Solicitors told Times Now that the gifting of equity shares and mutual fund units involves three distinct tax moments, at the donor's end, a genuine gift triggers no tax.

"At the recipient's end, the law exempts gifts from relatives (as defined), on occasion of marriage, under a will or by inheritance, from specified institutions or other specified categories. Outside these categories, if the aggregate fair market value of such assets received in a year exceeds Rs 50,000, the entire fair market value becomes taxable. When the recipient eventually sells, capital gains tax shall apply."

Lokesh Shah, Partner at CMS INDUSLAW said, "The transfer of equity shares and mutual fund units by way of gift among specified relatives (such as a spouse, siblings, spouses of siblings, and lineal ascendants and descendants), as prescribed under the Income Tax Act, 2025 is exempt from tax. This exemption applies to both the transferor and the recipient."

Explaining the rationale behind the gifting of shares, he said the gifting of equity shares is relatively straightforward. "In the case of listed equity shares, the transfer can typically be effected through Depository Instruction Slips. Historically, the gifting of mutual fund units has been more complex. Most mutual fund holdings in India are maintained in Statement of Account (SoA) form rather than in dematerialised form."

In the past, he told that gifting such units or transferring them to a private family trust often required conversion into demat form (in some cases involving a sale and repurchase), which was both time-consuming and potentially tax-inefficient.

"Securities and Exchange Board of India (SEBI), in October 2025, permitted the gifting of mutual fund units held in non-demat (SoA) mode through direct transfers via the online portals of transfer agents, thereby significantly simplifying the process. Gifts made to non-relatives, where the value of equity shares and/or mutual fund units exceeds Rs 50,000, are taxable in the hands of the recipient," he told.

The legal experts also shared some of the key documents that needs to be taken care of to avoid tax notices or disputes in family transfers of shares or mutual funds.

Amit Gupta, Partner, Saraf and partners told that it would be prudent to have a robust documentation around such transfers, viz. valid gift deed, Demat account statements /mutual fund ledger entries, original purchase documents and make proper disclosures of such gift in the respective ITR.

"These will not only help address tax scrutiny queries if they arise but would enable the done to claim the donor’s cost and period of the holding with respect to the underlying assets on future monetization," he said.

Manmeet Kaur, Partner at Karanjawala & Co. further added that the proper documentation is required for the gift purpose such as Delivery Instruction Slip (DIS) submitted to DP or off-market transfer via CDSL/NSDL platform in case of shares.

"In case of Mutual Funds Transfer Gift deed along with transfer request form will be required. Stamp Duty on gift transfer of securities stamp duty generally not applicable as there is no consideration. However in case of sale stamp duty is payable as per SEBI rules," Kaur added.