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I’m planning to transfer shares held in individual capacity to my HUF (Hindu Undivided Family) account where I am Karta. How and when would the capital gains be accounted for? Will it be based on the date I purchased the shares initially and then sold from HUF?
– Saurabh
(Query is answered by Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm)
A transfer of shares by an individual to the HUF in the form of gift will be tax exempt as it would be classified as ‘property received from a relative’ which is specifically exempt under section 56 (2)(x) of the Income Tax Act, 1961.
Further, when the HUF transfers these shares, it would be taxable in the hands of the HUF.
Moving on to the computation mechanism, when an asset is gifted or inherited, the purchase price and the period of holding of the previous owner would be treated for computing the capital gains of the transferor. Hence, in this case, the price paid and the period of holding of Karta would be considered for calculating the capital gains in the hands of the HUF.
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