You may stay invested in the shares and mutual funds through a non-resident demat account (NR demat account).
Under the exchange control laws, when an individual leaves India for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing resident bank account should be designated as a non-resident (ordinary) account (NRO account) due to change in residential status. The residential status under the exchange control law is different from that in income-tax laws.
You will need to inform the change of residential status to the bank where you have the resident demat account. A new NR demat account will be opened and securities would be transferred from the resident demat account to NR demat account. The resident demat account will be closed.
In this case, you will be able to trade from the NR demat account.
Alternatively, you may sell your investments and transfer the money to your father for further investment.
Transfer of money to your father will not be taxable in India either for you or your father. Under the income-tax laws, income tax is payable on any sum of money, movable property or immovable property received by an individual without consideration, except if the same is received from a ‘relative’. Under this provision, the term ‘relative’ includes father and son.
The taxability in both the above alternatives remain the same in the hands of seller as mentioned below:
i. Units of equity-oriented mutual funds that are held for more than 12 months are considered as long-term capital assets. Long-term capital gains on sale of equity-oriented mutual funds are exempt from tax in India. Short-term capital gains on the same are taxable at flat 15% (plus surcharge, if applicable, and education cess).
ii. Units of non-equity (debt) oriented mutual funds that are held for more than 36 months are considered long-term capital assets. Long-term capital gains on sale of debt mutual funds, after giving benefit for indexation, are taxable at flat 20% (plus surcharge, if applicable and education cess). Short-term capital gain on the same are taxable as per the slab rates as applicable.
iii. Equity shares listed on a recognized stock exchange in India will be classified as long term if held for more than 12 months.
Long-term capital gains from sale of listed equity shares are tax exempt provided securities transaction tax (STT) has been paid. Short-term capital gains on the same are taxable at flat 15% (plus surcharge, if applicable, and education cess).