A son, who moved abroad for work, transferred shares worth Rs 30 lakh to his father through an off-market transfer, which he had bought with his salary income over the years. The man did so thinking that he shouldn't continue holding a resident demat account after becoming an NRI, the person posted on Reddit. However, what surprised him was the Rs 34 lakh value in his AIS. This, he believes, have been double reported once by the mutual fund/RTA and once by CDSL. In such a scenario, does the father need to report the same in his income tax return, even though gifts from such relatives are tax-exempt? It is known that gits from specified relatives are exempt from tax. Since a son falls within the definition of a “relative”, the receipt of shares by the father would not be taxable irrespective of the value of shares transferred, Preeti Sharma, Partner, Global Employer Services, Tax & Regulatory Services, BDO India, told ET Wealth Online. Son gifts Rs 30 lakh worth shares: Should father disclose this in his income tax return? Being tax-exempt, however, is not the same as being invisible to the tax department. “A credit of Rs 30-34 lakh landing in his account, unexplained, is disproportionate to his declared income profile and is exactly the kind of gap that CPC's automated matching flags for scrutiny,” underlined CA Kanika Bali, Founder, The Tax Planet.ALSO READ | Did you claim a minimum Rs 10,000 income tax refund for your car bought in FY26? Here's how to claim your 1% TCS now So yes, the father needs to ideally disclose the share transfer in his ITR, even though it is tax-free. Although a genuine gift of shares from a son to his father is not regarded as a transfer for capital gains purposes in the hands of the donor, the reporting of such off-market transactions in the Annual Information Statement (AIS) often creates uncertainty, shared Mukul Bagla, Chair-Direct Taxes Committee, PHDCCI.ITR reporting for shares gifted by son to his father Experts point out that there is no requirement to offer the value of the gift to tax. But as a matter of prudence, regardless of the transaction value and whether such amounts are reflecting in AIS or other information statements, taxpayers may consider making an appropriate disclosure. Sharma said that the same can be disclosed in Schedule EI or exempt income. “This isn't optional box-ticking. It's what creates a paper trail that matches the AIS entry to a declared, exempt source. If a taxpayer simply leaves the entry unaddressed and files a return that doesn't account for it anywhere, the AIS shows an unexplained high-value credit sitting against a return that's silent on it,” added Bali. The tax implications in such cases generally arise only when the receiver subsequently sells the shares. Capital gains will generally be computed with reference to the original cost and holding period of the son, subject to applicable tax provisions.ALSO READ | Mumbai IT professional claims Rs 3.91 lakh TDS, gets only Rs 79,000 and Rs 3.36 lakh tax demand as employer failed to deposit tax; here's what happened nextWhat documentation must be kept for gifts received from relatives? Additionally, the father should preserve adequate documentation such as: • Gift deed or gift declaration. • Off-market transfer instruction/Delivery Instruction Slip (DIS). • Demat account statements reflecting the transfer. • Proof of the relationship between donor and donee, if ever called for. These documents would help explain the transaction if the tax department seeks clarification in future, stated Bagla.Transaction appears in AIS; what taxpayers must do to avoid future tax notices? Action needs to be taken on both sides since AIS mismatches are one of the most common triggers for routine tax notices. This is not because the underlying transaction is wrong, but because the return doesn't explain what AIS is reporting, explained Kanika Bali. Two things are worth doing in such cases: First: Father should use the AIS feedback facility on the income tax portal to respond to the specific entry - flagging it as "duplicate" if there are two entries for the same transaction and adding a note where the portal allows it. Second: Both father and son should keep documentation ready even though it isn't attached to the income tax return: a simple gift declaration or letter noting the relationship, the nature of the asset, the date of transfer, and that it was made without consideration; the off-market transfer instruction/CDSL statement; and, on the son's side, evidence that the shares were originally bought from disclosed, taxed income.ALSO READ | Mumbai man received tax notice over unreported income, not filing ITR; ITAT rules in his favour on TDS benefit, tax demand reduced According to Preeti Sharma, the taxpayer should:Verify the transaction details in AIS; Retain supporting documents such as gift declaration/deed, demat transfer instruction, CDSL/NSDL transaction statements, relationship proof, if required. As a thumb rule, even if it’s a gift from a specified relative, compare the AIS with own records; if the value or nature of the transaction is incorrectly reflected, submit feedback through the AIS portal indicating the appropriate reason; and retain supporting documents.Is double reporting by CDSL and the mutual fund/RTA common? How to handle this? Such instances are not uncommon. Since, AIS consolidates information received from multiple reporting entities, the same transaction may occasionally appear more than once if reported by different intermediaries like depositories (CDSL/NSDL), Registrars and Transfer Agents (RTAs), or other reporting entities, detailed Bagla. To handle this correctly, Sharma underlined, taxpayers should compare AIS entries with actual demat statements; check whether the quantity of shares, ISIN, date reported matches the actual transfer; verify whether the same transaction has been reported by more than one source. Bali further clarified that the income tax portal does run some deduplication logic when it compiles the Taxpayer Information Summary (TIS) from the underlying AIS entries, but it doesn't always catch every case.ALSO READ | Tax on destination wedding outside India: Will income tax apply on gifts in form of cash, property, gold jewellery? Know the rules “Check the TIS (not just the AIS) first, since TIS reflects the processed, part-deduplicated value and is usually closer to the correct figure,” she shared, adding if the AIS still shows two entries for what is demonstrably a single transaction, submit feedback marking the duplicate entry as "duplicate" or "information is not fully correct". Don't ignore these checkpoints when gifting shares etc. to your family Bagla pointed out the following key practical considerations: • Execute a proper gift deed clearly mentioning that the transfer is voluntary and without consideration. • Ensure the transfer is made through the prescribed depository mechanism. • Maintain demat statements and acknowledgement of the transfer. • Obtain demat statement of the donor also along with copy of his ITR for the last few years. • Verify the transaction in AIS after it is reported. • Preserve evidence establishing the donor-recipient relationship. • Remember that while the gift is tax-free, the father's cost of acquisition and holding period for future capital gains will generally be determined by applying the provisions relating to gifts, i.e., he steps into the shoes of the donor for capital gains purposes. • If the donor is an NRI, ensure compliance with FEMA and depository regulations. Kanika Bali underlined that what NRIs should avoid is leaving a resident demat account open and inactive after the status change. It's the single most common FEMA lapse in this area, and it's also the one most easily fixed with a phone call to the depository participant and a set of KYC documents.