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Transfer of Shares

What we Offer?
  • Advice and Tax planning on Transfer of Shares
  • Advice on implications in India as well as Australia
  • Preparation of Gift Deed/Transfer Document
  • Transfer of Shares procedures – ROC(Report on Compliance) Compliance
  • Share Valuation according to the Exchange Control Implications

Mr Rahul is a Business man and a Tax Resident in Australia. He also holds 10,000 shares of ‘Intelligent Private Limited’, a closely held Company Incorporated in India.

Mr Rahul is looking to transfer his shares to 3rd party. Implications Taxation
  • Transfer of Shares is a taxable transfer under Income Tax Act,1961. Thus Mr.Rahul has to bear Short Term Capital Gain or Long Term Capital Gain.
  • Short Term Capital Gain on unlisted Shares are taxable at Normal Rates after clubbing with other income.
  • Long Term Capital Gain would be taxed at 10% without any Indexation benefits.
A. Pricing Guidelines The price per share arrived at should be certified by a SEBI( Securities and Exchange Board of India) registered Category-I-Merchant Banker / Chartered Accountant
  • 1. The fair valuation of shares done by a SEBI registered Merchant Banker or a Chartered Accountant as per any internationally accepted pricing methodology on arm’s length basis, where the shares of the company are not listed on any recognized stock exchange in India; and
  • 2. The price as applicable to transfer of shares from Resident to Non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment.
B.Exchange control implications

Transfer of shares between two non-residents would fall under automatic route and should not require any approval as per exchange control regulations. Pricing guidelines do not apply to this transaction.

C.Stamp duty implications

Stamp duty is payable at the rate of 0.25 % of value of consideration received for transfer of shares. No stamp duty is payable on transfer of shares held in dematerialized form.

Mr Rahul is looking to transfer share to his Father who is a Resident Indian

A person resident outside India can transfer any security to a person resident in India by way of gift.

Thus Shares held by Mr.Rahul can be transferred to Father availing the General Permission. Father being a Resident in India, any gift received from ‘Relatives*’ is exempt from tax.

A Relative can be any of the following-
  • Spouse of the Individual
  • Brother or sister of the individual, spouse or of either parent
  • Lineal ascendants or descendants of individual or of spouse
  • Spouse of person referred in 2 or 3 above