Custodial Account for Shares: What's the Best Option?

Ans: Transfer of shares by father to its son under gift deed will not be considered as income and accordingly not taxable. When son transfer shares, cost and period of holding of father will be considered for calculating Income from capital gain.

Ans: Let's address your queries one by one:
1. After payment of Estate Duty in the USA, when the brokerage is allowed to release the shares, where will the shares of C have to be kept?
o Once the Estate Duty is paid, the brokerage can release the shares. Since C is a minor, his 50% share should be kept in a custodial account until he reaches the age of majority. The shares cannot be sold and the money parked in a bank account in India without following proper legal procedures and tax regulations.
2. When a part of the shares are sold by the brokerage for payment of Estate Duty, will the sale price attract capital gains tax?
o Yes, the sale price will attract capital gains tax. The capital gains tax will be calculated based on the difference between the sale price and the fair market value of the shares at the date of death.
3. What will be the cost of acquisition for B & C? Will it be the price at which the shares were originally acquired or the price on the date of death of the holder (this is the rate which has been considered for calculation of the Estate Duty)?
o The cost of acquisition for B and C will be the fair market value of the shares on the date of death of the holder. This value is used for calculating the Estate Duty.
I hope this helps clarify things. If you have any more questions or need further assistance, feel free to ask.

Ans: Multiple Brokerage Accounts: Yes, B can have two separate brokerage accounts with the same brokerage. This is often done for different purposes, such as managing personal investments separately from those of the minor (C). To open a second account, B would need to follow the brokerage's account opening procedures, which typically include providing identification, completing a new account application, and fulfilling any necessary Know Your Customer (KYC) requirements.
Selling Shares on Behalf of C: As C's legal guardian, B can sell the shares entitled to C and transfer the proceeds to an Indian bank account. B would need to ensure that all legal and tax requirements are met for both the sale and the transfer of funds. The proceeds can be transferred to an account in C's name, under B's guardianship, in India.
Keeping Shares in B's Account: B can also choose to keep the shares in her existing account until C reaches the age of majority. However, B would need to ensure that the shares are clearly designated as C's property and that all transactions are properly documented.
Transferring Funds to India: B can transfer the sale proceeds to India using various methods, such as bank transfers, online money transfer services, or wire transfers. It's important to choose a reliable service that offers competitive exchange rates and low fees.

Ans: Dear Souvik,
All these shares are non-tradable now and nothing can be done.