Raksha Bandhan: How to gift mutual funds to your sibling? Know the process and key conditions

As we celebrate the bond between brothers and sisters on Raksha Bandhan, a financial gift can make the occasion more meaningful.

Instead of a traditional present, you can gift mutual fund units to your sibling and help build a long-term financial cushion.

From the transfer process and eligibility to taxation and SIPs, here’s what investors need to know.

How can you gift mutual fund units to your sibling?

Manoj Sharma, Co-founder, Head – Alliance & Distributions, InvestValue, explained that mutual fund units can be gifted through Demat and Statement of Account (SoA) modes. Since 19 May 2025, eligible SoA units can also be transferred to siblings, eliminating the need to dematerialise them first.

• Demat: Log in to the broker/DP portal, select the units, enter the recipient’s PAN and demat details, choose the “Gift”/off-market transfer option, complete verification and CDSL/NSDL authentication (TPIN/OTP).
• SoA: Use MF Central, CAMS or KFintech, enter the transferor’s folio/scheme/units and recipient’s eligible folio/PAN, and complete OTP/KYC authentication.
• Required: PAN/KYC, folio and scheme details, recipient’s folio/PAN or demat details, registered mobile number and, where applicable, DIS or its online equivalent.

Shams Tabrej, Co-founder & CEO, Ezeepay, said the recipient generally needs a matching mutual fund folio. If unavailable, a zero-balance folio may be opened with KYC, PAN, bank details, FATCA inputs, and nomination/opt-out choice.

What are the eligibility criteria for gifting mutual funds?

Rahul Jain, President & Head, Nuvama Wealth, mentioned these criteria:

• The transferor must be an individual, resident or non-resident, but not a minor.
• Most open-ended equity, debt, hybrid and multi-asset schemes qualify.
• ETFs and solution-oriented schemes (retirement funds, children’s funds) are explicitly excluded from the newer SOA transfer facility.
• ELSS units can be gifted only after the three-year lock-in ends for each SIP/lump-sum instalment.
• Units under lien, pledge, freeze or other encumbrances cannot be transferred until the restriction is removed.
• No minimum holding period is required for gifting.

Gibin John, Senior Investment Strategist, Geojit Investments, said most equity, debt, hybrid and index funds can be gifted, provided the units are free from restrictions such as pledge, lien or lock-in.

Is Demat mandatory?

Jain said Demat-held units have been transferable since 2010, with the recipient requiring a demat account. The SEBI-AMFI framework now permits SoA-to-SoA gifting, although investors should confirm that the specific AMC/RTA has enabled the facility.

Are there any charges on gifting mutual funds?

John said transfer-related charges, including DP fees and stamp duty, may apply. Partial or full transfers are allowed, provided units are not locked, pledged, under lien, or otherwise restricted.

Sharma said CAMS currently charges 0.015% stamp duty for SoA transfers, borne by the transferor. Demat transfers may attract broker/DP charges. Partial transfers are permitted, although a holding falling below the scheme’s minimum balance may be compulsorily redeemed.

Tabrej said exit load is linked to redemption, so investors should not redeem units merely to pass them on unless necessary.

Sharma added that the 10-business-day cooling-off period after an SoA transfer is not an exit load. During this period, the recipient cannot redeem the transferred units.

How are gifted mutual funds taxed?

Jain shared the following points:

• Siblings are “relatives” under Section 92(5)(g) of the Income Tax Act, 2025, so there is no tax for either party at the time of gifting.
• The recipient pays capital gains tax when the units are eventually sold.
• The recipient inherits the donor’s original purchase cost and holding period. The holding period starts from the donor’s original purchase date.

“The Raksha Bandhan gift date does not reset the tax timeline. When the recipient later redeems the units, capital gains tax is paid by the recipient, based on the donor’s original purchase cost and holding period,” Tabrej said.

He further mentioned that both siblings should retain the following documents:

• Original purchase statements/contract or transaction records
• Folio and scheme details
• Number of units gifted and date of transfer
• Original acquisition cost and dates of the units
• Transfer/gift confirmation
• Capital-gains statements from the AMC/RTA
• Relevant bank and KYC records

“A gift deed can also be retained as supporting evidence of the transfer,” Sharma says.

Can you gift mutual funds to an NRI sibling?

Yes. “Mutual fund units can be transferred between a resident and NRI sibling, subject to FEMA, KYC and account-type requirements,” Sharma says.

He said CAMS allows NRI folios with “KYC Registered” status. However, under the current SoA facility, transfers from an RI or NRI-NRO folio to an NRI-NRE folio are not permitted, while NRI-NRE to RI or NRI-NRO transfers are allowed, subject to conditions.

Is gifting mutual funds to a minor sibling allowed?

Tabrej said, “With the current transfer system in the SoA, you cannot use the gifting or transfer option when the destination is a minor folio. CAMS also says that moving funds between a major account and a minor account is not permitted.

“A minor can own mutual fund units. In that setup, the child is the only unitholder. The parent or legal guardian runs the folio until the child reaches adulthood,” Tabrej added.

Sharma noted that existing units cannot be directly gifted to a minor through the standard SoA facility. A fresh investment through the guardian route is safer.

Can SIP units be gifted?

Yes. Sharma said already-allotted SIP units can be gifted if eligible, but the SIP itself cannot be transferred. It remains linked to the giver’s folio and bank mandate. To continue investing for the sibling, the giver must stop/cancel the existing SIP, and the sibling can start a fresh SIP through their own folio and bank account.

“If your goal is to grow a long-term investment for the sibling, it can help to set up a new folio and a separate SIP in the sibling’s eligible name. This way, it is clearer how future payments will be tracked and who owns what,” Tabrej noted.