New Delhi, July 15 -- What's a gift that has the potential to be worth more tomorrow than it is today? Stock. But before transferring shares to a family member or friend, it's important to understand the tax rules. Who receives the gift determines whether it's tax-free and how future gains are taxed. Here's a look at the rules and the implications before you make the final transfer.

Explaining how gifted stocks are taxed (when presented to a family member) under different scenarios, CA Divam Sharma, Co-founder & Fund Manager, Green Portfolio, says, "they are fully tax-exempt at the time of transfer if the recipient is a close relative, which includes spouse, siblings, parents, children, and lineal ascendants or descendants."

One, the do...