Gifting US Stocks to Family in India: A Tax-Smart Guide

Gifting US stocks to family members in India—especially parents—is not just a financial gesture but often a part of long-term wealth transfer and estate planning. However, such transfers are subject to multiple layers of regulation across jurisdictions, including India’s Income Tax Act, FEMA (Foreign Exchange Management Act), and US gift tax laws.

If you’re planning to gift US stocks to your relatives in India, here’s a complete 7-step guide to understand the tax treatment, exemptions, compliance requirements, and the legal process involved.

1) India Gift Tax Rules & Relative-Based Exemptions

In India, gifts are governed by Section 56(2)(x) of the Income Tax Act, 1961. While cash or property gifts above ₹50,000 are usually taxable under “Income from Other Sources,” a key exception applies when the gift is from a “relative.”

A relative, for tax purposes, includes:

• Parents and children
• Siblings
• Spouse
• Lineal ascendants and descendants
• Spouse’s parents or siblings

Gifts received from such relatives are fully exempt, regardless of the value. Therefore, if you gift US stocks to your parents or children, no gift tax is payable in India, and the recipient does not have to report it as income, though disclosure is still mandatory.

2) FEMA Compliance: Is Gifting Foreign Stocks Permitted?

Under FEMA, gifting foreign assets—like US stocks—is classified as a capital account transaction, and such transactions are regulated unless specifically permitted under Schedule 2 of the FEMA (Capital Account Transactions) Regulations.

Currently, gifting foreign stocks to Indian residents is not explicitly permitted in Schedule 2, which makes the legality of such transfers ambiguous. While many proceed with such gifts through compliant brokerages, it is strongly recommended to consult a FEMA expert or your bank’s Authorized Dealer (AD) before initiating the transfer.

⚠️ Recent Developments ⚠️

• Banks are increasingly scrutinizing stock transfers, especially those routed through family trusts or exceeding LRS (Liberalized Remittance Scheme) limits.
• Any attempt to bypass RBI’s remittance caps (e.g., via layered structures) can result in blocked transfers or penalties.

3) Donor-Side Filings: US Gift Tax Implications

If you’re a US person (citizen or tax resident), US gift tax rules apply when transferring assets, even to relatives abroad.

• The 2025 annual gift tax exemption is $19,000 per recipient.
• If you exceed this, you must file IRS Form 709 to report the gift.
• There is no immediate capital gains tax, but the gifted asset’s cost basis carries over to the recipient.
• For non-resident aliens, the exemption is limited to $60,000, and gifts above that may attract taxes between 18% and 40%.

Hence, it’s important to plan the transfer in consultation with a US tax advisor, especially for high-value transactions.

4) How to Transfer US Stocks to a Relative in India

To successfully gift US stocks to your Indian relative, follow these steps:

1. Brokerage Setup: Your relative must have a brokerage account in India that can hold foreign securities (e.g., via platforms like Vested, ICICI Direct Global, or Interactive Brokers).
2. Gift Deed: Draft a legally valid gift deed outlining the details of the gift (number of shares, company name, market value, date, and relationship).
3. Initiate Transfer: Instruct your US brokerage to transfer the shares to your relative’s account. Some brokerages may require specific authorization for third-party transfers.
4. Disclosures: As the donor, file Form 709 (if applicable). As the recipient, your relative must disclose the foreign assets in Schedule FA of their Indian income tax return.

5) Tax Treatment for the Indian Recipient

If the gift is from a relative, the gift itself is tax-exempt. However, any income or gains arising from the asset are taxable:

• Dividends from US stocks are taxed at the recipient’s applicable slab rate in India.
• Capital gains on sale are taxed as:
  • Long-Term Capital Gains (LTCG): 12.5% (if held >12 months)
  • Short-Term Capital Gains (STCG): 20% (if held ≤12 months)

Under Indian tax law, the original cost and holding period of the stocks are carried over from the donor to the recipient.

Here is a Gift Deed Template for Gifting US Stocks which can be further customized:

This document should be printed on stamp paper, signed by both parties, and ideally notarized for record-keeping.

6) Gift Deed for Shares

This Gift Deed is executed on [Date] by:

Donor: [Your Full Name], residing at [Your Address]

Donee: [Relative’s Full Name], residing at [Recipient’s Address in India]

The Donor, out of love and affection, gifts [Number] shares of [Company Name], listed on [NYSE/NASDAQ], having a current market value of USD [Value] to the Donee.

The Donee accepts the gift. Both parties confirm the relationship qualifies for tax exemption under Section 56(2)(x) of the Income Tax Act, 1961.

This deed is executed in compliance with all applicable laws, including FEMA and US Tax Code.

Signatures:

________________ (Donor)

________________ (Donee)

Witnesses:

7) Adhere to this Compliance Checklist ✅:

Final Thoughts: Proceed with Clarity and Compliance

Gifting US stocks to your relatives in India—especially parents—can be a thoughtful way to support family wealth building. While such gifts are legally permitted, they fall under a tight web of regulations governed by both Indian and US authorities.

To avoid compliance risks and unintended tax consequences, it’s essential to take a structured, transparent, and well-documented approach.

Here’s what you should always do:

• Prepare a formal gift deed that clearly documents the transfer
• Maintain proper records to support the transaction for audits or queries
• File all required tax forms, including IRS Form 709 and Schedule FA
• Avoid using trusts or informal structures to circumvent FEMA rules
• Consult qualified FEMA and tax professionals before initiating any cross-border transfers

With the right planning and expert guidance, your gift can be both legally compliant and financially impactful—helping your family while staying fully aligned with regulatory norms.

Need expert help navigating cross-border gifting, FEMA rules, or tax filings?

PrimeWealth specializes in NRI financial planning, global wealth transfers, and regulatory compliance—so you can gift confidently, without the guesswork.  Book a free consultation with our expert advisors at https://primewealth.co.in/#freeconsultation.