Make Christmas the Season of Stock-Gifting!
The festive season has begun, and Christmas is not too far away! Choosing a gift for such occasions can be daunting because ultimately you want them to be happy with your gift. But don’t worry, one of the best gifts you can give is stocks! Why are they one of the best options, you ask? It’s because when you gift stocks, you’re transferring the ownership of the shares to someone else, and what better way to tell someone you love them than by gifting them good fortune? Besides, the stocks don’t necessarily limit to a particular age group or occasion, which is the cherry on the cake! You can gift these anytime to anyone.
On another note, did you know that stocks bought in small quantities contribute towards building a wealth fund? But if you’re not sure about the process of gifting stocks, fret not. We’ve got you covered. Let’s understand how and what are some of the basic requirements you need to know when gifting stocks, and more in this article.
What are stocks?
The term ‘stock’ refers to a share of a company’s ownership. And each stock, also known as a share, is worth a certain amount based on the company’s overall value. When you purchase shares in a company, you are effectively purchasing part ownership of a public corporation. The term ‘stock,’ in its most basic sense, refers to a portion of a company’s ownership.
Investing in stocks allows you to benefit from long-term capital growth. Dividends paid out by the company are another way you can benefit from. At the same time, if you wish to liquidate your shares, you can do so quickly. All you have to do is to decide on the number of shares you wish to liquidate. If you’re selling them through a broker, inform them of the numbers and have them sell them for you. But if you’re doing it manually yourself, enter your sell order manually in an inline brokerage account. Once done, confirm your executions. And make sure that all stock trades are confirmed.
Can you gift stocks to others?
The answer to this question is, yes! You can gift stocks to others. It basically means, gifting equity shares by transferring them from the donor (the person who is gifting) to the donee (the person who is receiving the gift) without any monetary exchange. An important point to remember is that the transfer of equity shares given as gifts takes place off-market, which means it is between the depository and the depository participant, without the involvement of a stock exchange.
How can you gift stocks?
Below are the steps to transfer stocks for gifting purposes:
Step 1: Submit the Delivery Instruction Slip (DIS)
A DIS must be submitted by the donor to his Demat account service provider, also known as a Depository Participant (DP). The International Securities Identification Number (ISIN) code of the shares, the DP ID, client ID, and the DP name of the donee or receiver should all be included in the DIS. Apart from these details, the slip should also include instructions on the number of shares under transfer and the date on which the share transfer should be completed.
Step 2: Submit receipt instruction
The donee/receiver of stocks must submit an instruction of receipt of the shares to their depository participant (Demat account provider) for the stocks to be received. To ease the receipt of the shares from the donor’s Demat account, information such as the DP ID, name, etc., should be provided.
Step 3: Execution of instructions
The details mentioned in both the delivery instructions and the receipt instructions are tallied after receiving the DIS, which must match. After the receiver submits the receipt instruction on the specified date of execution, the shares received from the donor will be deposited to the receiver’s DP account.
How to choose the stocks to gift?
There are many stocks from which you can choose. But you must be careful while choosing them as they can be risky. The reason is the market’s volatility. Besides, your motive behind gifting stocks is that you want the receiver to get the best out of it. So, your goal here is to make this gift as profitable as possible, which means you need to choose stocks that have growth potential.
Do thorough research of the companies you want to invest in. tickertape offers a variety of investment analysis tools like key metrics, profitability, technical indicators, peer comparison, and much more, which help you in making an informed decision.
Continue reading tax on gifted stocks and the benefits of gifting stocks.
