You have to think about your children. As a result, every parent thinks about saving something for their children. But mutual funds can be an effective option for you to fulfill that goal. But the question is, how do you gift a mutual fund to your child?
The income tax law of our country says that parents can gift mutual fund units to their children. According to section 56 (2) of the Income Tax Act of 1961, any gift given by a close relative is considered tax-free. That is, if parents give any gift to their children, no additional tax is payable on it.
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Currently, mutual funds can be transferred from one account to another very easily from a demat account. Earlier, there were some restrictions on such transfers, but now the situation has become much easier or simpler. As per the instructions of the Association of Mutual Funds in India, every fund house has introduced the facility of online gifting. Through CAMS and KFintech, investors can gift their holdings in whole or in part to someone else.
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However, in order to make such a gift, there should be a folio for the child in the same fund house. And there should also be a cooling period after such an online application. However, it can be said that if you follow the right plan, then mutual funds can be a strong foundation for securing your future.