Can you gift mutual fund units? How transfers work and how they are taxed

Yes. Since 19 May 2025 you can gift mutual fund units to another person without selling them. For units held with the fund house, you make the transfer online through CAMS, KFintech or MF Central. The units reach the receiver's folio within two working days. A gift is not a sale for you, so you pay no capital gains tax when you give it.

CAMS and KFintech are registrars, the firms that keep a fund house's investor records. MF Central is their common website. A folio is the account number a fund house gives for your holding. Until 2024, units recorded with a fund house in a statement of account, rather than in a demat account, could not be transferred directly.

Can you transfer mutual fund units to someone else?

Yes, to another individual, under an industry process from AMFI that covers resident and non-resident individual investors from 19 May 2025. AMFI's circular is dated 8 May 2025. It names transfers to siblings, gifting of units, transfers to a third party, and adding or removing a unit holder.

These units cannot move this way:

• ETFs (exchange traded funds, which trade on a stock exchange).
• Units under a lien or freeze. A lien is a lender's claim on your units.
• Units still in a lock-in, a period during which you cannot sell at all. ELSS (equity linked savings scheme) units are locked in for three years from each purchase; see the ELSS lock-in period.

AMFI's first phase, in 2024, covered only a few cases. One is a nominee moving units to the legal heirs after a death, covered in claiming investments after an investor's death.

How do you gift mutual fund units?

You make the request online, on a registrar's portal or on MF Central. AMFI's process asks for the following.

1. Both of you need KYC with "KYC validated" status. KYC is the identity check every investor completes; our guide to mutual fund KYC explains the statuses. If any holder's status is something else, the system stops the giver there.
2. The receiver must be an individual with a valid folio in the same mutual fund. If there is none, the receiver first opens a zero balance folio, a folio with no units in it yet.
3. That folio needs a valid PAN, bank account, email address and mobile number. It also needs a completed nomination form or a declaration opting out of nomination. The receiver must be eligible to hold the units under the scheme's offer document.
4. The giver logs in, picks the scheme and the units, and enters the receiver's folio number and a reason.
5. The registrar sends the giver two different OTPs, one to the registered email and one to the mobile number. An OTP is a one-time password, and these stay valid for about 30 minutes. If the giver's folio is joint, each holder gets them. The receiver gets none.
6. The giver pays any stamp duty online from the registered bank account.
7. The registrar moves the units into the receiver's folio within two working days, and both sides get a statement.

• You can transfer part of a holding. If the balance left in your folio falls below the scheme's minimum, those leftover units are compulsorily redeemed, which means sold.
• A request lodged on an IDCW record date leaves that payout with the giver. IDCW is a payout a fund makes from its income or gains.
• The receiver cannot redeem the transferred units for 10 days from the date of transfer.
• The units keep the same plan and option, and they leave your folio on a first-in, first-out basis, so the earliest purchases go first.

Is stamp duty payable on a gift?

A gift of units carries no stamp duty under SEBI's reading of the Stamp Act. Stamp duty is a charge under that Act on the issue and transfer of securities, which include mutual fund units. SEBI's stamp duty FAQ says none is charged on an off-market transfer without consideration, such as a gift.

A transfer for a price carries 0.015%. The registrar shows any duty before you confirm. Where it applies, the giver pays, worked out on the last available NAV, the price of one unit. AMFI's process provides for no charge other than any stamp duty.

What if your units are in a demat account?

Use an off-market transfer through your depository participant, choosing "Gift" as the reason. ELSS units cannot be transferred while locked in. Moving units between a statement and a demat account is covered in do you need a demat account for mutual funds.

Is tax payable when you gift units?

Not for the giver. Capital gains tax is tax on the profit when units are sold. Section 70 of the Income-tax Act, 2025 takes a gift by an individual or a Hindu undivided family out of it. For the receiver, it depends on who the giver is. Gifts of units from relatives are not taxed in the receiver's hands. The law's list of relatives covers:

• a spouse;
• brothers and sisters, and the spouse's brothers and sisters;
• the brothers and sisters of either parent;
• parents, grandparents and anyone else in the direct line above or below (children, grandchildren), and the same relatives of the spouse;
• the spouses of those named in the second to fourth points.

Cousins and friends are not on that list. Gifts from anyone else are taxed as the receiver's income once their total value in a tax year is more than ₹50,000. Then the whole amount is taxed, including the first ₹50,000. Gifts received on the occasion of the receiver's own marriage, or under a will, are also outside this charge.

What happens when the receiver sells?

The receiver generally takes over the giver's cost and holding period. The holding period is how long the units have been held, counting from the giver's purchase. It decides whether a gain is short-term or long-term. On equity-oriented units, a gain on units held for more than 12 months is a long-term capital gain. If the gift was taxed as income, the value that was taxed becomes the receiver's cost instead.

Here is an example with assumed numbers. Ramesh bought units of an equity-oriented fund for ₹2,00,000 in March 2021. An equity-oriented fund keeps at least 65% of its money in shares of Indian listed companies, on the annual average. In 2026 he gifts the units to his daughter Aditi, 27, through the registrar's portal. Assume they are worth ₹3,40,000 that day.

• Ramesh pays no capital gains tax on the gift.
• A gift from her father, a relative, is not Aditi's income.
• Aditi sells in November 2026 for an assumed ₹3,40,000. Her cost is her father's ₹2,00,000, and his holding since 2021 counts, so the ₹1,40,000 gain is long-term.
• Assume securities transaction tax (STT, a tax charged when units are sold) is paid on the sale. Assume she has no other long-term equity gains that year. Assume her other income uses up the basic tax-free limit.
• On equity-oriented units, when STT is paid on the sale, a long-term gain is taxed at 12.5% on the portion above ₹1,25,000 in a tax year. That is 12.5% of ₹15,000, which is ₹1,875, plus 4% cess (an extra charge on the tax), so ₹1,950.

Had a friend gifted Aditi the same units, their ₹3,40,000 value would be above ₹50,000, so the whole value would be her income that year. That value would then be her cost on a later sale.

Gifted units may be debt fund units (a Specified Mutual Fund) acquired on or after 1 April 2023. Then the gain is taxed at the slab rate, the rate for your total income, whatever the holding period. Our article on how SIP returns are taxed covers those rules.

When is the income still taxed as yours?

When you gift units to your spouse or your son's wife, the income from them is still taxed as yours. This is clubbing: the tax law adds the income to the giver's income. Section 99 applies where the units were transferred without adequate consideration, meaning without a fair price paid.

The income here includes any capital gain when the units are sold, and IDCW paid on them. A child under 18 is covered by a separate rule in section 99 (the old section 64(1A)). The child's income is added to the income of the parent who earns more, or, if the parents are no longer married, the parent who maintains the child. That rule has its own worked example in investing in a minor's name.

Gifts to an adult son or daughter, a parent or a sibling are different. An outright, irrevocable gift is not caught by this rule. Once the units are theirs, their later income is their own.

Had Ramesh gifted the same units to his wife Kavita, the gift itself would not be taxed, because a spouse is a relative. When Kavita sells and makes the ₹1,40,000 gain, it is added to Ramesh's income, not hers. How much tax that creates depends on his other gains that year.

Can you pay for units in someone else's name instead?

No, not from your own bank account, if the receiver is an adult. SBI Mutual Fund's Statement of Additional Information says third-party payments are refused except in a few cases. A third-party payment comes from a bank account other than the first applicant's. One exception is a parent or guardian paying for a minor's investment.

For an adult relative, the route is to give them the money, and they invest from their own bank account. Giving money to your spouse to invest is likely to be treated the same way for clubbing. Check with a tax adviser.