Kushal Dudheria, Author - Blog by Tickertape

A share transfer is the process of transferring existing shares, its rights and liabilities from one person to another. Shares used to be held in physical form earlier as share certificates, but with the advent of technology in finance, the share market has gone digital and shares are now preferably held in dematerialized or demat form. There are various reasons for which one may want to transfer shares. Some of them are mentioned below: One may have more than one demat account and may want to merge them into a single demat account. One may have one demat account and want to maintain a separate account for one or more reasons, like, one demat for long-term investments and another for short-term investments. One may want to change their broker. One may want to give shares to family or friends. This article covers: Steps to transfer shares from one demat account to another Tax implications on transfer of shares from one demat account to another Steps to transfer shares from one demat account to another There are two national depositories in India - NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) who handle all securities in depository accounts (DP accounts). Where share transfer is concerned, there are mainly two types of transfers: Intra-depository transfer: that is NSDL to NSDL transfer or CDSL to CDSL transfer. Inter-depository transfer: that is NSDL to CDSL transfer or vice versa. All shares can be transferred manually or online. Now, let’s discuss steps for online transfer of shares for intra-depository transfers. CDSL provides a feature called “EASIEST” that allows the online transfer of shares between demat accounts. Before you can initiate the transfer, you need to register on CDSL’s website. The process to use EASIEST is outlined below: Step 1: Register yourself on the CDSL website. Step 2: Select the facility as EASIEST in CDSL and fill in the form with the required details and fill. Step 3: Once the form has been filled in, take the printout of the form and submit it to your depository participant (DP). Step 4: The depository participant (DP) will then send it to CDSL, which will verify your details. And you’ll get the login credentials in the email within 2-3 days. Step 5: Login into your account and transfer the shares. NSDL also has a similar process like CDSL. NSDL provides a feature called “Speed-e” that allows the online transfer of shares between demat accounts. Before you can initiate the transfer, you need to register on NSDL’s website. The process to transfer shares through Speed-e is outlined below: Step 1: Register yourself on the NSDL website. Step 2: Select the facility as Speed-e for NSDL and fill in the form with the required details and fill. Step 3: Once the form has been filled in, take the printout of the form and submit it to your depository participant (DP). Step 4: The depository participant (DP) will then send it to NSDL, which will verify your details. And you’ll get the login credentials in the email within 2-3 days. Step 5: Login into your account and transfer the shares. Now, let’s discuss steps for online transfer of shares for inter-depository transfers. Transfer of securities from an account in one depository to an account in another depository is termed as an inter-depository transfer. This facility is quite similar to the account transfers within NSDL. However, it can be done only for securities that are available for dematerialisation on both the depositories. The account in NSDL/CDSL can be either a clearing account or a beneficiary account. Step 1: Check whether your account is a clearing account or a beneficiary account. Step 2: For debiting the clearing account or the beneficial account with NSDL/CDSL, the form for "inter-depository delivery instruction" is required to be submitted by the clearing member/beneficial owner to its DP. Step 3: For crediting the clearing account or the beneficial account, the standing instruction given for automatically crediting the account is applicable. In case the standing instructions are not given, then the form for "Inter-Depository Receipt Instruction" is required to be submitted by the clearing member/beneficial owner to its DP. Step 4: Batches to effect the transfer are processed on the same working day as both depositories are connected. Step 5: The Issuer/Registrar & Transfer Agent is informed about the transfer by both the depositories and it amends its records accordingly. Tax implications on transfer of shares from one demat account to another When you transfer shares to your own account, there is no tax implication as there is no change in the ownership of shares. However, any earned income from the transfer of shares will be treated as short term capital gains or long term capital gains depending on the period of holding. Any gain on shares held for more than 12 mth will be treated as long term capital gain and any gain on shares held for less than 12 mth will be treated as short term capital gains. Tax rate on short term capital gain is 15% and on long term capital gain is 10%. However, long term capital gain up to Rs 1,00,000 is exempt from capital gain tax. Your overall tax liability, nonetheless, is not impacted by the transfer of shares from your own account to yourself, and the tax liability does not change. When you transfer shares to another person’s demat account too, there is no tax levied on you as long as the transfer is genuine and is backed by a genuine gift deed to maintain an audit trail of the transfer. The Gift Tax Act, specifically, Section 47, provisions for ‘gifts’ to be excluded from ‘transfer’ which makes giving shares as gifts despite them being capital assets, non-taxable. Note that shares transferred to another person are, however, taxable in the hands of the recipient under section 56(2) of the Income Tax Act, if the fair market value of the asset transferred is more than Rs 50,000. Taxes on the gifting of shares through a transfer are exempt in the following situations: Individual receiving shares from relatives (including siblings, spouse and lineal ascendants or descendants) Individual receiving shares as a marriage gift. Shares received by way of inheritance. Sale of any shares you have received from others via a transfer is liable for capital gains tax.

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