Off-Market Transaction

Investments

An off-market transaction in securities involves transferring shares directly between demat accounts without going through the stock exchange. Used for gifting shares to family, transferring securities post-marriage, or settling OFS (Offer For Sale) transactions. Has specific tax implications.

In detail

When off-market transactions occur:n1. Gift of shares: transferring shares to family members (tax-free if gift from specified relative)n2. Estate settlement: transferring shares to legal heirs after death of account holdern3. Pledge release: when shares pledged against loans are returnedn4. OFS participation settlementnnHow to do off-market transfer:nSubmit Delivery Instruction Slip (DIS) at your DP (depository participant/broker)nOr online via CDSL/NSDL online systemnReceiving party's DP ID and client ID requirednnTax on receiving gifted shares:nFrom specified relatives: zero tax on receiptnFrom non-relatives above Rs 50K fair value: taxable as incomenCapital gains when eventually sold: cost of acquisition = fair value on date of gift (from relative) or original cost (complex)

Real-life example

🇮🇳 India example

Rajesh gifts 100 TCS shares (market value Rs 3.5L) to his son Arjun via off-market transfer. No tax on Arjun for receiving (gift from father = specified relative). When Arjun sells 2 years later at Rs 4.5L: capital gain = Rs 4.5L - Rs 3.5L (fair value on gift date) = Rs 1L. LTCG (held 2 years): Rs 1L - Rs 1.25L exemption = zero tax. Efficient wealth transfer.

Frequently asked questions

Can I transfer mutual fund units off-market to a family member? ▼

No. Mutual fund units cannot be transferred between folios (except in specific cases like deceased account transmission). To gift mutual fund investments, you must redeem (paying capital gains tax) and the recipient invests fresh. This is why equity shares in demat are often more gift-friendly than mutual fund units.