What is the tax implication when shares are transferred from parents to their children?
Shares transferred from parents to their children as gifts or inheritances are exempt from income tax in the year of the transfer. Taxability arises in the year that the gifted/ inherited shares are sold by the children. To determine the nature of and compute capital gains:
- Holding Period- Taken from the purchase date of the previous owners (the parents), till the sale date by the children.
- Acquisition Cost- Taken as the purchase price of the previous owners (the parents).
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