My mother has some investments in shares & mutual funds. She wants to now distribute this ( gift) equally to all her children & keep one portion for her. Pls let me know what is the process to be followed & what will be the most tax efficient method . Does she needs to make a gift deed for each of her children ?
Your mother's intention to distribute her investments among her children is a thoughtful gesture. Here's a simple explanation of the process and its tax implications in India.
1. Gifting Process: Your mother can gift her shares and mutual funds to her children. This can be done through a gift deed or even a simple letter stating her intention to gift the shares. The letter should mention the details of the shares/mutual funds, the name of the recipient, and the relationship between the donor (your mother) and the donee (her children).
2. Tax Implications for the Donor (Your Mother): In India, any gift given by a parent to their child does not attract any tax, irrespective of the value. So, your mother will not have to pay any tax when she gifts these shares and mutual funds to her children.
3. Tax Implications for the Donee (Her Children): The children will not have to pay any tax upon receiving the gift. However, if they decide to sell these shares or mutual funds in the future, they will be liable to pay tax under the head 'Income from Capital Gains'. The tax rate will depend on whether it's a short-term or long-term capital gain.
4. Gift Deed: Although it's not mandatory, it's advisable to execute a gift deed for each child. This will serve as a legal document and can be useful in case of any disputes in the future.
I hope this helps!