Gift MF Units

Gifting mutual fund (MF) units in India is legal and simplified, especially after SEBI changes, allowing direct transfer of demat and Statement of Account (SOA) units to relatives without redemption, avoiding immediate tax for the donor. Key rules involve KYC for both parties, recipient having a folio with the same fund house (for SOA), a 10-day cooling period, and potential clubbing provisions for minor children, with the recipient paying tax on future redemption. [1, 2, 3, 4, 5, 6] Key Rules & Process:

• Legality & Tax: Gifting isn't a "transfer" under Income Tax Act Section 47(iii), so no capital gains tax for the giver. Gifts from specified relatives (parents, siblings, etc.) are tax-free for the recipient under Section 56(2)(x).
• Eligibility: Can gift to parents, adult children, siblings, spouse, and other specified relatives.
• Demat Units: Transfer via demat account by adding the recipient as a beneficiary and authorizing via CDSL/NSDL TPIN.
• SOA Units (Non-Demat): Direct transfer possible via online portals (CAMS/KFintech) by submitting a request with recipient's folio details.
• Recipient Requirements: Must have a valid folio with the same fund house for SOA transfers; KYC needed for both.
• Cooling Period: A mandatory ~10-day lock-in/cooling period applies after the request before transfer finalizes.
• Clubbing Provisions: Income from units gifted to a minor child is added to the parent's income (with a small exemption) until the child turns 18.

Tax Implications for Recipient:
• The recipient pays tax (capital gains/income) only when they redeem the units, based on holding period (short/long term) and their applicable tax slab.

Simplified Process (Post-SEBI Rules):
1. Initiate: Donor starts transfer via fund house or registrar portal (CAMS/KFintech) or demat account.
2. Details: Provide recipient's details (folio number, PAN).
3. Verify: Recipient gets an email/SMS; both parties complete verification (OTP/TPIN).
4. Cool-Off: Wait for the cooling period (around 10 days).
5. Complete: Units get transferred to the recipient's folio/demat account. [1, 2, 3, 4, 8, 10]

Please check with tax expert before gifting Mutual FUnd Units