Mutual Fund Gifting: Do you want to gift mutual funds to your children or their future? Leaving wealth for future generations is everyone’s desire. But how easy or even possible is it with mutual funds? Can you gift or inherit mutual funds to your children or family members? Let’s find out how.
Under the Income Tax Act, parents are legally permitted to gift mutual fund units to their children. According to tax expert Balwant Jain, Section 56(2)(x) of the Income Tax Act, 1961, prohibits parents from gifting mutual funds to their children. Mutual fund units held in demat accounts can always be transferred from one demat account to another. Previously, mutual fund units held in the Statement of Account had some operational limitations .
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However, following the AMFI circular, all fund houses have now enabled online transfers through their registrars. CAMS and KFintech, the registrars of all fund houses, now allow investors to transfer all or part of their holdings to another individual as a gift.
Know the gifting process
- Your son should have a folio in his name in the same fund house.
- The gifting feature is only available online. It can be initiated through the CAMS or KFintech website, depending on the registrar of your holding.
- Note that a 10-day cooling period applies, during which the units gifted by your son cannot be redeemed or transferred.
- If the units are held in a demat account, they can be gifted through a process like transfer by cheque to a bank account.