5 days ago
How to Gift Mutual Funds to Siblings on Raksha Bandhan
You can give mutual fund units to your brother or sister as a financial gift.
The transfer can happen through a Demat account or through a Statement of Account.
The recipient usually needs matching KYC, PAN and folio or Demat details.
Most regular mutual funds can be gifted, but locked, pledged or restricted units cannot be transferred.
ELSS units must complete their three-year lock-in first.
Siblings generally do not pay tax when the gift is made.
When the recipient later sells the units, they pay any applicable capital-gains tax using the donor’s original purchase price and holding period.
SIP units already bought may be gifted, but future SIP payments must remain linked to the original account or be started again by the sibling.
Eligible mutual fund units can be gifted through Demat or Statement of Account modes.
Most open-ended equity, debt, hybrid, index and multi-asset funds qualify, subject to restrictions.
Siblings generally pay no tax when the gift is made, but the recipient pays capital-gains tax on later sale.
The recipient inherits the donor’s original purchase cost and holding period for tax purposes.
Already-allotted SIP units may be gifted, but the SIP itself remains with the donor and cannot be transferred.
- Who
- Individuals may gift eligible mutual fund units to their siblings, including between resident and NRI siblings subject to applicable conditions.
- What
- The process, eligibility rules, charges, taxation and SIP treatment for gifting mutual fund units are explained.
- Where
- Transfers may be completed through a broker or depository participant, MF Central, CAMS or KFintech.
- When
- Demat-held units have been transferable since 2010; eligible SoA-to-SoA transfers to siblings have been permitted since 19 May 2025.
- Why
- A mutual fund gift can help a sibling build a long-term financial cushion instead of receiving a traditional present.
Key facts
- Transfer modes
- Demat and Statement of Account modes are available for eligible units.
- Eligible transferor
- The transferor must be an individual, resident or non-resident, and must not be a minor.
- Eligible schemes
- Most open-ended equity, debt, hybrid, multi-asset and index funds qualify; ETFs and solution-oriented schemes are excluded from the newer SoA facility.
- Restrictions
- Units under lien, pledge, freeze, lock-in or other encumbrances cannot be transferred until the restriction ends.
- SoA stamp duty
- CAMS currently charges 0.015% stamp duty for SoA transfers, generally borne by the transferor.
- Tax treatment
- Siblings are treated as relatives under Section 92(5)(g) of the Income Tax Act, 2025, so there is no tax at the time of gifting; capital-gains tax may apply when the recipient sells.
- Cooling-off period
- After an SoA transfer, the recipient cannot redeem the transferred units during the stated 10-business-day cooling-off period.
- SIP treatment
- Already-allotted SIP units may be gifted, but the SIP mandate and future investments cannot be transferred.
Quotes
Shams Tabrej
Co-founder and CEO of Ezeepay, who explains taxation and transfer conditions.
“The Raksha Bandhan gift date does not reset the tax timeline. When the recipient later redeems the units, capital gains tax is paid by the recipient, based on the donor’s original purchase cost and holding period.”
livemint.com
“With the current transfer system in the SoA, you cannot use the gifting or transfer option when the destination is a minor folio.”
livemint.com
Sources
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