Wipro Insider Trading: Sons Get Rs 500 Crore Shares As Gift From Father; Who Will Pay Taxes On Gifting Stocks?

Billionaire Azim Premji has gifted equity shares worth Rs 500 crore of his Wipro to two sons namely Rishad Premji and Tariq Premji. Both Rishad and Tariq received over 51.15 lakh shares or 0.10% each. The sons' shareholding have accordingly risen in Wipro, which will be reported in Q4 of the FY24 period. But it also does bring the question of whether there are any tax implications on gifting equity shares to family members or outside.

In the insider trading regulatory filing, Azim Premji said, "I, Azim H Premji, (the "Seller") wish to intimate you that 1,02,30,180 equity shares of Wipro Limited ("Company") held by me, amounting to 0.20% of the share capital of the Company were transferred to Rishad Azim Premji (No of shares: 51,15,090) and Tariq Azim Premji (No of shares: 51,15,090) in the form of Gift."

Accordingly, Tariq's shareholding in Wipro rises to 66,19,215 equity shares or 0.13% each, while Rishad's stake rises to 67,68,891 equity shares or 0.13% each.

As of December 31, 2023, Tariq held 15,04,125 equity shares or 0.03% in Wipro, while Rishad's shareholding was slightly higher to the tune of 16,53,801 equity shares or 0.03%.

Meanwhile, following the transaction, the philanthropist Azim Premji's shareholding has dipped to 21,55,78,357 equity shares or 4.12% in Wipro --- from earlier -- 22,58,08,537 equity shares or 4.32% as of December 31, 2023.

The transaction was carried out on January 20, 2024, when the stock market was open for trading on Saturday due to a holiday on January 22.

So if there any tax implications on gifting equity shares to investors, either on the receiver or sender?

As per the Income Tax guidelines, gifts can be classified as following from a taxation point of view:

- Any sum of money received without consideration, can be termed as a 'monetary gift'.

- Specified movable properties received without consideration, can be termed as
'gift of movable property'.

- Specified movable properties received at a reduced price (i.e. for inadequate consideration), can be termed as 'movable property received for less than its fair market value'.

- Immovable properties received without consideration, can be termed as 'gift of
immovable property.

- Immovable properties acquired at a reduced price (i.e. for inadequate
consideration), it can be termed as 'immovable property received for less than its stamp duty value'.

The transaction related to Azim Premji and his sons falls under movable property gifting.

IT-Dept's guidelines highlighted that prescribed movable property means shares/securities, jewellery, archaeological
collections, drawings, paintings, sculptures or any work of art and bullion, being capital assets of the taxpayer and includes Virtual Digital Asset (VDA).

According to Zerodha's website, the sender of the gift is not liable to pay taxes as the Gift Tax Act (GTA) was abolished. According to the Income Tax Act, capital gains can arise from the transfer of a capital asset. However, a gift is expressly excluded from the definition of transfer under Section 47. Therefore, income tax on such a transaction is not liable to be paid by the sender of a gift.

But what about the receiver of the gift? Zerodha cited Section 56(2) of the Income Tax Act, the recipient is liable to be taxed for gifts of movable property, such as shares, ETFs, mutual funds, jewellery, drawings, etc., without consideration and exceeding the fair market value of more than ₹50,000. Income from such gifts should be reported under the head Income from Other Sources in the Income Tax Return, and tax at slab rates should be paid.

Notably, there are some tax exemptions on gifting stocks as well. These are -- individuals receiving gifts from a relative (including siblings, spouse and lineal ascendants or descendants); individuals receiving gifts on the occasion of marriage; and gifts received by inheritance.

Moreover, if shares, ETFs, mutual funds, etc., are received as a gift and subsequently sold, the income would be taxable under the head Income from Capital Gains.

According to Zerodha, to justify the genuineness of the gift transaction, proper documentation, such as a gift deed, should be maintained by the sender and recipient. In case of high gift amounts, there are chances of scrutiny from the tax department.

Disclaimer: The write-up just highlights the insider trading in Wipro and tax rules, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.