SEBI has introduced a major change by allowing the gifting of mutual fund (MF) units. This means you can now give your loved ones a financial gift that may grow in value over time.
According to Trustedarms Finserv, this move creates an opportunity to offer long-term financial security to families, children, and friends.
Below is a simple explanation of who can gift mutual funds, how the transfer works, and the tax rules involved.
Who Can Gift Mutual Funds?
Anyone who has a KYC-compliant mutual fund folio can gift mutual fund units.
These units can be gifted to:
Children
Family members
Friends
Guardians
Any mutual fund investor
Similarly, you can also receive mutual fund units as a gift from others.
How Are Gifted Units Transferred?
The gifted units move directly from the giver’s folio to the recipient’s folio.
The transfer happens through either the CAMS or KFintech portal.
Important points:
The recipient must give their consent for the transfer.
The initial cost and holding period of the investment are also passed on to the recipient.
What Are the Tax Rules?
The giver does not have to pay any tax when gifting mutual fund units.
If the recipient receives the gift from a family member, it is completely tax-exempt.
If the gift is received from someone other than family and the total value exceeds ₹50,000 in a year, the recipient will have to pay tax.
When the recipient later redeems the units, they must pay the applicable capital gains tax based on the holding period.
