The wedding season and festive celebrations bring with them joy, togetherness and countless occasions to exchange gifts. Every year, we spend time choosing the perfect present for our family and friends—be it clothes, jewellery, sweets or the latest gadgets. But have you ever thought of gifting mutual fund units?
It is not just a unique and thoughtful gift, but one that can also strengthen the financial future of your loved ones. Gifting mutual fund units is a smart, modern and long-term way of expressing your care and affection.
How Can You Gift Mutual Fund Units?
You can gift mutual fund units to your parents, children, siblings or even your friends. The process has now become much simpler and more transparent than before.
Mutual fund units can be gifted in two ways:
- Through a Demat Account, or
- In Statement of Account (SoA) or Non-Demat Mode.
Gifting Through a Demat Account
If your mutual fund units are held in a demat account, the recipient should also have a demat account.
The process is quite similar to transferring shares. You simply need to submit a Delivery Instruction Slip (DIS) to the bank or brokerage firm through which your demat account is maintained. Once the instruction is processed, the mutual fund units are transferred from your demat account to the recipient’s demat account.
Demat accounts in India are maintained with either NSDL or CDSL. If both the donor and the recipient have demat accounts with CDSL, the transfer can also be completed entirely online.
Gifting Units Held in Statement of Account (SoA) Mode
Most mutual fund investors in India hold their investments in Statement of Account (SoA) mode, without a demat account. They too can now gift their mutual fund units to their loved ones online through the platforms made available by the Registrar and Transfer Agents (Cams and kfintech) under the industry framework.
To initiate the transfer, the units should not be under a lock-in period or be subject to a lien, and both the donor and the recipient should have completed their KYC formalities. If the recipient does not already have a mutual fund folio, a zero-balance folio can be opened before completing the transfer
The entire process is completed online. Both the donor and the recipient authenticate the transaction through One-Time Passwords (OTPs) sent to their registered mobile numbers and email addresses. Once the transfer is successfully completed, confirmation is sent to both parties through email and SMS.
Investors may choose to transfer their entire holding or gift only a part of their mutual fund units.
Tax and Legal Aspects
Gifting mutual fund units does not create any tax liability for the donor.
The tax implications for the recipient depend upon who has gifted the units.
If the mutual fund units are received as a gift from a family member or another specified relative, the gift is generally exempt from tax.
However, if the units are received from a non-relative, gifts having an aggregate value of up to ₹50,000 in a financial year are generally tax-free. If the total value exceeds this limit, the amount may become taxable in the hands of the recipient under the provisions of the Income-tax Act, 2025.
There is, however, an important exception. Gifts received on the occasion of marriage are exempt from tax irrespective of their value. Therefore, if a bride or groom receives mutual fund units as a wedding gift, whether from relatives or non-relatives, no tax is payable on the value of the gift.
Whenever the recipient eventually redeems the gifted mutual fund units, capital gains tax will apply in the normal manner, just as it would for any other mutual fund investment. For this purpose, the recipient inherits the donor’s original cost of acquisition and period of holding.
Under the current operational framework, mutual fund units received as a gift cannot be redeemed for ten days from the date of transfer.
One important point to remember is that once you gift your mutual fund units to your children, siblings or anyone else, they become the absolute owner of those units. The gift is irrevocable, and you cannot claim ownership over those units in the future.
Why Mutual Funds Make an Ideal Wedding or Festive Gift
Gifting mutual fund units during weddings and festivals offers several advantages over traditional gifts.
While conventional gifts bring temporary happiness, a mutual fund investment has the potential to create long-term financial security. It not only gives the recipient a valuable financial asset but also encourages the habit of investing and promotes financial discipline.
If you traditionally prefer gifting gold or silver during weddings, Gold Mutual Funds or Silver Mutual Funds can be excellent alternatives. They combine the emotional value associated with precious metals with the convenience and diversification offered by mutual fund investments. In other words, they allow you to blend tradition with modern investing.
The recipient is also free to nominate a beneficiary of their choice for the gifted mutual fund units.
Final Thoughts
This wedding and festive season, consider giving a gift that goes beyond the ordinary.
Instead of gifting another household appliance or decorative item, gift something that has the potential to grow in value over time.
A mutual fund is more than just an investment—it is a gift of financial security, a step towards wealth creation and a thoughtful way of encouraging your loved ones to build a better financial future.
After all, the best gifts are not always the ones that are the most expensive; they are the ones that continue to add value long after they are received.
