Planning to Gift Mutual Funds to Loved Ones? Read this before making any decisions.
- Remin Francis I R
- Oct 15
- 4 min read
Mutual funds are an excellent way to invest and build wealth over time. However, there are situations when you may want to transfer your mutual fund units, whether it's to a family member, a friend, or even after a life-changing event.
In this blog post, we’ll explore how you can use a facility for mutual fund units held in a non-dematerialised format, an online-only facility to transfer or gift your mutual fund units. If you've ever wondered how to simplify your transfers, minimise the risk of fraud, and make sure the process is secure, this guide will answer all your questions.
What is the SoA Transfer Facility?
The SoA (Statement of Account) Transfer Facility is a new, online-only service that allows you to transfer mutual fund units held in non-demat (Statement of Account) mode. This means you can now transfer mutual fund units without the need for dematerialisation, making the process much simpler and more secure. It was designed to reduce the chances of fraud and make transferring mutual fund units smoother than ever before.
Who is Eligible to Use This Facility?
If you are an individual investor, whether you're a Resident Indian or a Non-Resident Indian (NRI), you can take advantage of this facility. However, there are some restrictions to keep in mind. For example, transfers involving a minor’s folio are not permitted, and transfers from a Resident/NRO account to an NRE account are not allowed. But if you’re transferring from an NRE account to a Resident/NRO account, that’s absolutely fine.
What Scenarios Can This Facility Be Used For?
The SoA Transfer Facility is versatile and can be used in many different situations, such as:
Minor to Major: When a unitholder turns 18, they can add a parent, guardian, or spouse as a joint holder.
Surviving Joint Holder: If one of the joint holders passes away, the surviving holder can add a new joint holder.
Nominee to Legal Heir: A nominee who inherits mutual fund units can transfer them to the legal heirs.
Transfer to Siblings or Third Parties: You can directly transfer units to your siblings, family members, or even other individuals.
Addition/Deletion of Joint Holders: If you need to modify the list of joint holders in your folio, this transfer facility will allow you to do that.
Which Schemes Are Covered by This Facility?
This transfer facility is available for almost all mutual fund schemes. However, there are a few exclusions, such as:
Exchange-Traded Funds (ETFs): Transfers involving ETFs are not covered by this facility.
Solution-Oriented Schemes: Age-based schemes like Children's Funds and Retirement Funds are excluded due to their specific eligibility criteria.
How Does the Transfer Process Work?
The transfer process is simple and entirely online. You don’t need to fill out any physical forms or visit an office. You can initiate the transfer through various platforms, like
Registrar and Transfer Agent (RTA) websites like CAMS or KFintech.
The official websites of Asset Management Companies (AMCs).
Digital portals like the MF Central platform.
Once initiated, the transfer process is quick and secure, and the mutual fund units will be transferred to the recipient's folio.
Key Rules and Conditions to Know
While the process is simple, there are a few important rules you need to be aware of:
10-Day Cooling Period: Once the transfer is completed, the transferee cannot redeem the units for 10 days. This is a security measure to prevent fraud.
Partial Transfers: You can transfer a partial amount of your units, but if the remaining balance in the transferor's folio falls below the scheme's minimum balance requirement, the remaining units will be compulsorily redeemed.
ELSS Schemes: Units in Equity-Linked Savings Schemes (ELSS) can only be transferred after their 3-year lock-in period. The transferee will receive the units without any lock-in.
Broker Details: If there’s an existing broker code (ARN) associated with the units, it will carry over to the transferee’s folio.
Nominee Information: The transferee’s nominee details will apply to the transferred units, replacing the transferor's nominee information.
Ineligible Units: Units under lien, pledge, or those that are part of a frozen folio due to regulatory or KYC issues cannot be transferred.
Taxation and Financial Implications
It's important to be aware of the tax implications of transferring or gifting mutual fund units:
Capital Gains: When units are transferred to a sibling or a third party, it is treated as a financial transaction. For the transferor, it is treated as a "redemption," which may be subject to capital gains tax. For the transferee, it is treated as a "purchase."
TDS: Currently, no Tax Deducted at Source (TDS) applies to these transfers. Both the transferor and transferee are responsible for calculating and paying any taxes.
STT (Securities Transaction Tax): Since these are off-market transactions, no STT is deducted.
Exit Load: No exit load applies to these transfers.
Disclaimer: The information in this post is based on the latest guidelines available at the time. Rules and regulations may change, so it's important to check with your mutual fund provider or a financial advisor for the most current information before proceeding with any transfer.
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