Mutual Funds: Making Changes After the Death of a Joint Holder is Now Much Easier, Here's What Experts Say
Mutual Funds: Making Changes After the Death of a Joint Holder is Now Much Easier, Here's What Experts Say
Mutual Funds: This is great news for mutual fund investors. Adding a new joint holder and transferring units in a mutual fund after the death of a joint holder has become much easier. This facility will be available online under the new AMFI guidelines.
Mutual Funds: This is a relief for mutual fund investors. Adding a new joint holder and transferring units in mutual fund investments held in Statement of Account (SOA) mode after the death of a co-holder (joint holder) has become much easier. The Association of Mutual Funds in India (AMFI) has issued new guidelines in this regard, which will provide significant convenience to millions of investors. Until now, direct transfer of mutual funds held in SOA mode was not permitted. In such cases, investors had to first convert the units to demat form and then transfer them through off-market transactions. This process was not only lengthy but also considered quite complex for ordinary investors. Let's find out what tax and investment expert Balwant Jain has to say about this.
Online Option to Add a Joint Holder
Tax and investment expert Balwant Jain says that under the new system, the facility to add a joint holder and transfer units will be available online through the mutual fund house's registrar and the MF Central portal. Investors will be able to complete this process from the comfort of their homes. For transaction security, verification through OTP sent to mobile and email will be mandatory. If the folio is joint, all holders will have to confirm with an OTP.
Under What Circumstances Can a New Joint Holder Be Added?
According to AMFI, a new joint holder can be added with the surviving holder after the death of a joint holder. In addition, when a minor becomes an adult, their parents, guardian, spouse, or sibling can also be added to their folio. Transfer of units from the nominee's folio to the legal heirs' folio is also permitted. Stamp Duty and Scheme-Related Rules
According to the new guidelines, no stamp duty will be levied on transferring units to parents, children, or spouses, but stamp duty will be applicable for transfers to siblings or any third party. This facility will be available in all mutual fund schemes. However, ETFs are excluded from this. Units can only be transferred to a single individual, and the recipient must have a KYC-compliant folio with the same fund house.
Partial Transfers and Cooling Period
Balwant Jain further adds that investors will now be able to transfer units partially from their folio, provided a minimum balance is maintained. If the balance falls below the minimum investment, the remaining units will be redeemed. To prevent fraud, a 10-day cooling period has been introduced after the transfer, during which the recipient will not be able to redeem the units.
Caution Regarding Taxes
He stated that the Income Tax Department may treat unit transfers as equivalent to redemption. Therefore, it is essential to report it correctly in the income tax return. While gifting to parents, spouses, or children will not attract tax at the time of transfer, capital gains tax will be applicable at the time of redemption. In the case of gifts to a third party, amounts exceeding Rs. 50,000 may be subject to tax.
Why is this change important for investors?
He says that this step will make the mutual fund industry more investor-friendly. It will simplify matters related to inheritance and eliminate unnecessary technical hurdles. The digital process will increase transparency and reduce the likelihood of fraud.
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