Whether you’re a new investor or an experienced one, understanding the process of share transfers can be daunting. Through this article, we would discuss an overview of how to make this complicated process into a very simple one. Right from the types of shares, rules and regulations to the entire process of transferring shares. With this guide in hand, transferring shares should be a very simple process.
Types of share transfer
Physical transfer involves the physical movement of shares from one shareholder to another. This can be done by transferring the share certificate to the name of the new shareholder. The company’s registrar of companies will then update the company’s register of members.
Electronic transfer involves the electronic movement of shares from one shareholder to another. This is done through a depository participant (DP), who holds shares in an electronic form on behalf of shareholders. To effect an electronic transfer, shareholders need to instruct their DP to debit their account and credit the account of the new shareholder. The DP will then send a confirmation to both parties once the transaction is complete.
Share Transfer Form
Procedure for share transfer in India
The process of share transfer in India is relatively simple and straightforward. Shareholders who wish to transfer their shares can do so by following the steps below:
1. Firstly, shareholders will need to obtain a physical copy of the share certificate from the company. The Share certificate must be duly signed by the shareholder and counter-signed by a witness.
2. Secondly, shareholders will need to fill out a share transfer form which is available with the company or can be downloaded from the internet. The Share transfer form must be duly signed by the shareholder and witnessed by a third party.
3. Once the above two steps have been completed, shareholders will need to submit the physical copy of the share certificate along with the completed share transfer form to the company’s registrar of companies. The registrar will then update the records and issue a new share certificate in the name of the transferee shareholder.
SEBI guidelines on share transfer
The securities market in India is governed by SEBI. It lays down the rules and regulations for the smooth functioning of the securities market. One of the areas where SEBI has issued guidelines is share transfer.
According to SEBI, shares can be transferred only through a registered stock broker or a depository participant. The process of share transfer involves certain documents which need to be submitted to the concerned authority. These include a duly filled transfer form, KYC documents of the transferee, PAN details, etc.
Once all these documents are submitted, the stock broker or depository participant will verify them and if everything is in order, they will proceed with the share transfer. The shares will be transferred from the account of the shareholder to that of the transferee within a few days.
Thus, these are the SEBI guidelines on share transfer which need to be followed by shareholders while transferring their shares.
Tax implications of share transfer in India
If you are looking to transfer your shares in India, there are a few things you need to be aware of from a tax perspective. Here is a brief overview of the tax implications of share transfer in India:
1. Capital Gains Tax: If you are transferring your shares for consideration (i.e. receiving payment for the shares), then any gains you make on the sale of the shares will be subject to capital gains tax. The rate of capital gains tax will depend on how long you have held the shares for – if they have been held for less than 12 months, then the gains will be taxed at your marginal rate of income tax; if they have been held for 12 months or more, then the gains will be taxed at a concessional rate of 10%.
2. Stamp Duty: In most cases, stamp duty will also be payable on the transfer of shares in India. The amount of stamp duty payable will depend on the value of the shares being transferred and the state in which the transfer takes place.
3. Securities Transaction Tax: Securities transaction tax (STT) is also payable on the transfer of shares in India. STT is levied at a rate of 0.1% on the value of the shares being transferred.
4. Withholding Tax: If you are transferring your shares to a non-resident, then withholding tax may be payable on the transaction at a rate of 20%. This withholding tax can be reduced or exempted under
To summarize it, transferring shares in India is a complicated process that needs to be done with the utmost careless consideration. But with the help of this guide, you should now have a better understanding of how the transfer process works, what documents are required, and what steps need to be taken. For further assistance, please contact an efilings expert.