Give the gift of mutual funds to your loved ones this Diwali—it will help ensure their future financial security..

Every year during Diwali, we select various gifts—silver coins, boxes of sweets, and more—to bring smiles to the faces of our loved ones. Yet, such joys are often fleeting. But consider this: what if this year’s gift were something that could grow over time, providing a robust safety net for the future of those you hold dear?

The answer lies in mutual funds. Why, then, is a gift of mutual funds so special? By gifting mutual funds to a family member, you are providing an investment that has the potential to grow steadily over time.

A Strong Step Toward Goals: Whether it is funding a child’s higher education, helping a young couple realize their dream of buying a home, or securing financial independence for retirement, such a financial gift directly contributes to turning dreams into reality.

The Power of Compounding: The earlier you begin investing, the more time your money has to grow. The power of compounding helps multiply the value of your investment significantly over the long term. This Diwali gift does not need to be large in monetary terms; what matters more is the intent behind it and the financial discipline it fosters.

A Gift for a Child’s Future
Children are the most natural beneficiaries when it comes to the future. Since milestones like higher education or other significant life events are often years away, families have an excellent opportunity to plan ahead.

Investing in a Minor’s Name: Parents or guardians can invest in mutual funds on behalf of a minor, subject to applicable regulations and documentation requirements.

Choosing the Right Scheme: If the goal is several years away, families comfortable with market risks might consider an appropriate equity-oriented scheme.

A Lesson in Financial Literacy: This gift offers children a valuable, life-long lesson that goes beyond mere money. As they grow older, parents can explain how markets function and why patience is essential.

Can you also gift mutual funds to adults?
You can gift mutual funds to a spouse, sibling, parent, or friend. If your mutual fund units are held in a demat account, you can transfer them directly to the recipient's demat account without having to sell them. This is known as an 'off-market transfer.' The only condition is that the holdings must be free from any pledges, lock-in periods, or other transfer restrictions.

Transferring without a demat account
Many investors hold their mutual fund units directly with the fund house in a 'Statement of Account' (SoA) folio. These units can also be transferred to individuals who are not your relatives. The only requirement is that both the donor and the recipient must have a 'validated' folio.

How to make a gift
Visit the website of CAMS, KFintech, or MF Central.
Click on the 'Transfer of MF Units' tab.
Enter your PAN, mobile number, and email ID to check your eligibility.
Select the fund house, folio, scheme, and the number of units you wish to transfer.
Enter the recipient's PAN, folio number, email ID, and mobile number.
The transfer is typically completed within two business days.
To prevent fraud, the transferred units remain locked for ten days, during which time they cannot be redeemed.

Keep tax rules in mind
If you gift mutual funds to a relative, there is no tax liability upon the receipt of the financial asset; however, the original cost of acquisition for the donor becomes the cost basis for the recipient. If the recipient is not a relative and the value of the financial asset exceeds ₹50,000, it is treated as 'income from other sources' and is taxed according to the recipient's applicable tax slab.

Disclaimer: This content has been sourced and edited from Amar Ujala. While we modified it for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.