Tax Query: Tax implications for transferring holdings in joint demat account to exclusive accounts

My spouse and I have a joint demat account. In addition, both of us have exclusive demat accounts. Now, we are desirous of transferring the holdings in the joint demat account to exclusive demat accounts in the proportion of 50:50. While doing so, will there be any query from the direct taxes department and are there any tax implications?

Transfer of holdings from the joint demat account into individual demat accounts should follow the proportion in which investments are made by each of the joint holders.  For example, if the joint holders had invested equally into the demat account to buy these securities, then the securities can be split 50:50 into individual accounts.

However, if the investment was made in a different ratio, say, 100 per cent by you and none by your spouse, then 100 per cent should be transferred to your individual account. If the split to individual demat accounts does not follow the above said ratio of original investment, then any income arising to your spouse from the securities (such as dividends, interest, etc.), will be clubbed in your hands for the purposes of taxation. 

The writer is Partner, Deloitte India

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