Mutual fund
Diwali is just about to come, and if you want to give some special and beneficial gifts to your family or close friends on this occasion, then mutual funds can be a great option. This is not only a sensible gift, but in the future you can also get good returns. The best thing is that now a demat account is not required to gift mutual funds. You can gift mutual fund units directly from the fund house without a broker or trading account. This method is especially good for those who want to make their close a habit of investing, but want to avoid the hassle of demat account, etc.
How to gift mutual funds without a demat account?
If you someone Mutual fund If you want to gift units, then first of all you have to give a form to the Fund House (AMC) or their Registrar (RTA), which is called transfer request form. In this, you have to transfer your follower number, the name of the scheme, how many units and the person you are gifting the units, PAN, KYC and bank details have to be filled. In some cases, the fund house may also confirm the identification or documents of your and the receiver.
As soon as your request is approved, those units get directly added to the receiver’s folio. Both also get a statement of this transfer, so that the records remain clear. In this whole process, you do not need a demat account, which not only makes this method easier, but also reduces expenses.
How will the mutual fund gift be taxed?
It is absolutely valid to gift a mutual fund units, but it is important to understand the rules of tax before giving and taking it. If you gift mutual fund units to your husband or wife, children, parents or siblings, then there is no tax on it. But if you have gifted these units to a person who is not your ‘close relative’ (eg friend, cousin or any distant relative), and the total value of the gift is more than ₹ 50,000, then the receiver will have to pay tax on that amount. He will have to file tax by adding this amount to his income. Apart from this, when the receiver later sells those units, it will also be charged a capital gains tax. This tax depends on when the units were purchased and at what cost. Therefore, it is better to understand these tax rules once before gifting mutual funds.
Take care of them for non-Demate transfer
Transferring mutual fund units in a non-DeMAT way is a very easy and cheap way for the family. There is neither a broker fees nor any trading or demat account is required. With this, you can easily make a habit of investing a member of your family and when they maintain investment for a long time, you can also earn good returns.
But it is important to keep some things in mind. First, the KYC of both the gifts and the taker should be completed. Also, the receiver must have that Fund House (AMC) Folio. If not, then a new folio will have to be opened. When you invest in a mutual fund, the asset management company (AMC) gives you an identity number. This is called Folio Number. This is an alphanumeric code, which is connected to your PAN. With the help of this number, all your mutual fund investments made in that AMC are tracked. One more thing is a lock-in period in some mutual fund schemes such as ELSS (tax saving funds) or close-ended funds. Units cannot be transferred during this period.