Mutual Fund Gift: You can gift mutual funds without a demat account, know how..

Mutual Fund Gifting: People often want to gift mutual fund units to their relatives, but many investors wonder if this is possible without a demat account. The answer is yes, you can. This process is called a non-dematerialized transfer, which is done directly through an asset management company (AMC) or registrar and transfer agent (RTA).

How to Make a Non-Demat Transfer or Gift

Investors must submit a transfer request form or a written application to the AMC or RTA, including the folio number, scheme name, number of units to be transferred, and the recipient's information, such as PAN, KYC, and bank details. In some cases, the AMC may request physical verification or documentation from both parties. Once the transfer is approved, the units are added to the recipient's folio, and both parties receive confirmation in the form of a statement of account.

What the Tax Rules Say
Gifting mutual fund units is legally valid, but certain tax rules apply.

Gifts given to relatives (spouse, children, parents, siblings) are not taxable.

If the gift amount exceeds ₹50,000 and the recipient is not a relative, the amount will be taxable as 'income from other sources'.

When the receiver later sells those units, capital gains tax will be levied based on the original purchase date and price of the units.

Advantages of Non-Demat Transfer
The ability to link investments directly to the AMC; no broker or trading account is required.

An easy way to transfer investments for family or succession planning.
Gifting helps the receiver develop investment habits and benefits from compounding.
Saves on additional broker-related fees.

Notes:
Both the giver and the recipient must be KYC compliant.
The receiver must have an existing folio with the AMC or create a new one.
Some schemes, such as ELSS or closed-end schemes, do not allow transfers during the lock-in period.
Keep all documents safe to avoid future tax-related issues.

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