Gifting mutual funds to a loved one is a thoughtful and practical way to help them invest in their financial future. But many people hesitate because they believe a demat account is a must for such gifts. The good news is, you don’t need a demat account to gift mutual funds! Here’s everything you need to know about gifting mutual funds without a demat account.

1. What is a Mutual Fund Gift?

· A mutual fund gift involves transferring mutual fund units from one person (the donor) to another person (the recipient). Instead of gifting a physical item, you’re providing an investment opportunity that can grow over time.

· This form of gifting is especially popular for special occasions like birthdays, weddings, and anniversaries, or to help loved ones start their investment journey.

2. How to gift Mutual Funds Without a Demat Account

You can gift mutual funds directly without the need for a demat account by following these steps:

Step 1: Choose the Mutual Fund

· Select the mutual fund scheme you want to gift. It could be a debt fund, equity fund, or hybrid fund depending on the recipient’s investment preferences.

· Note: The mutual fund must allow unit transfer to another person. Most mutual funds have a process in place for gifting or transferring units.

Step 2: Fill Out the gift Form

· Mutual fund houses offer a gift form that must be filled out by the donor (you). This form allows you to transfer the mutual fund units to the recipient.

· The form will typically ask for the name and PAN number of both the donor and the recipient.

Step 3: Submit the gift Form

· You can submit the gift form online or offline, depending on the mutual fund house.

o For online submissions, you will need to log into the mutual fund’s investor portal and follow the steps to transfer units to the recipient.

o For offline submissions, you will have to visit the mutual fund’s office or a registrar’s office (e.g., CAMS, KARVY) and submit the required forms.

Step 4: Acknowledgment and Transfer

· Once the gift form is processed, the mutual fund house will transfer the units to the recipient’s account. The recipient does not need a demat account for this process.

· The recipient will receive the mutual fund units in their mutual fund folio (not in a demat account), and they can continue to hold or redeem them as per their preference.

3. What Does the Recipient Need?

The recipient does not need a demat account to receive mutual funds. However, they must have:

· A mutual fund folio with the same fund house where the units are being transferred.

o If they don’t have a folio, they can open one by submitting a KYC (Know Your Customer) form, which is mandatory for all mutual fund investments.

4. Can You gift Mutual Fund Units to Someone Without a PAN?

· PAN Requirement: Yes, both the donor and the recipient must have a valid PAN card. The recipient’s PAN is necessary for the transfer of units and for regulatory compliance.

· If the recipient does not have a PAN card, they will need to apply for one before the transfer can take place.

5. Are There Any Tax Implications on Gifting Mutual Funds?

· Gift Tax: In India, mutual fund gifts are generally exempt from gift tax under the Income Tax Act. However, if the gift exceeds ₹50,000 in a financial year, it may be subject to tax under the Income from Other Sources category.

· Capital Gains Tax: If the recipient later sells the gifted units, they will be liable to pay capital gains tax based on the period they hold the units (long-term or short-term).

6. Advantages of Gifting Mutual Funds

· Long-Term Value: Mutual funds are a great way to create long-term wealth, making them an excellent gift option.

· No Need for Demat Account: As mentioned, you don’t need a demat account to gift mutual fund units, which simplifies the process.

· Start Investing Early: By gifting mutual funds, you can encourage the recipient, especially younger ones, to start investing and build a financial portfolio early in life.

7. Popular Mutual Fund Houses for Gifting

Many top mutual fund houses allow easy gifting options. Some of the popular ones include:

· HDFC Mutual Fund

· SBI Mutual Fund

· ICICI Prudential Mutual Fund

· Aditya Birla sun Life Mutual Fund

· Axis Mutual Fund

Each of these funds has its own process for unit transfers, so make sure to check their specific guidelines.

8. Final Thoughts: The gift That Keeps Giving

Gifting mutual fund units is an excellent way to give someone a head start in their investment journey. The best part? You don’t need a demat account to make it happen! Simply choose the fund, fill out the gift form, and let the investment grow for the recipient’s future.

So, next time you’re looking for a meaningful gift, consider gifting mutual funds—it’s a thoughtful, practical, and financially smart choice!

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.