Mutual funds in Non-Demat Form can be transferred as “gift” to spouse, children, parents, or siblings as well as to Any Third Party.
Transfer Process – Online
- CAMS – https://www.camsonline.com/Investors/Service-requests/GoGreen/Transfer-units
- KFintech – https://mfs.kfintech.com/transferofUnits
- Provide the recipient’s PAN folio details, and Authorize the transfer via OTP
Pre-Requisites
- KYC is Mandatory : Both transferor and recipient relative must be KYC-compliant
- Zero-Balance Folio : The recipient must have an existing folio with the same Mutual Fund House. If not, “Zero Balance Folio” can be created during the transfer process
- Lock-in Periods : Units in ELSS (Tax-saving funds) cannot be transferred until the 3-year lock-in period is over. Similarly, units under lien (collateral for a loan) cannot be transferred
- Cooling Period : Once transferred, the recipient cannot redeem the units for at least 10 days
Tax Implications
- At the time of Transfer : There is no Capital Gains Tax for transferor or the recipient relative, provided they fall under the “relative” definition of the Income Tax Act ( spouse, siblings, lineal ascendants / descendants )
- When the Relative Sells : When relative eventually sells the units, they will pay Capital Gains Tax. Crucially, the original cost of purchase and the original date of holding of Transferor will be used to calculate relative’s tax
- Clubbing Rules : If transferor gift units to a spouse or minor child, any income (like dividends) generated from those units may be “clubbed” and taxed as transferor’s income
