Give mutual funds: How do it work and how can you transfer it to legal heirs | Mint

Suitable Mutual Fund (MF) units to your loved ones are a great way to show your love. But donated MFS does not work like other assets such as land, buildings, jewelry and cash. You must clearly follow procedures specified by the regulators. Here is a guide on how MFs can be gifted and the tax implications for the donor and the recipient. How can UU transfer MF units to a Demat account? Unlike gift assets such as property and gold, MFs cannot be easily transferred. If you have a Demat account, your MF units can donate to your loved ones by following a few simple steps. If the MF units are not kept in a Demat account, they must be converted into a Demat form as it can only be transferred to the beneficiary. You must first move your MF units to your Demat account if you intend to give it to your spouse, children, siblings or loved ones. Here are the steps to transfer your MF units to your Demat account and then to the recipient of the gift. This can be done via offline or online mode. Offline method: Get a conversion request form (CRF) from your Deponiter participant (DP). Fill in the CRF with your details and information on MF units. Submit the form and your MF account statement to your DP. The DP will process the transfer with the registrar of the fund. Online -Method: Report online to your Demat account. Go to the Mutual Funds section and select the transfer option. Choose the fund and number of units to transfer. Choose your Demat account as the destination. Review and submit the request. Suitable MF units Through Demat accounts currently, mutual fund units held in Dematerialized (Demat) mode are freely transferable, according to the Association of Mutual Funds in India (AMFI). So you can give MF units to your loved one if he/she also has a Demat account (either with CDSL or NDSL, the deposit or DP participants). All you have to do is fill in a ‘delivery instruction slip’ (Dis), which is a command to transfer your MF units to another Demat account and submit it to your DP. You must provide all the relevant information, including the Demat account details of the recipient. A transaction fee of 0.03% of the transfer value or £ 25, which is higher, plus an 18% GST is charged for transferring MF units from one Demat account to another. In addition, a seal rights of 0.015% apply to all transfers. If you want to donate MF units to your minor daughter or son on his/her birthday, you can buy units in your child’s name, and you can be the Guardian. But once the children reach the age of 18, they will gain full control of the investments as it will officially become their money. How about MF units in non-demat form? If MF units are kept in a non-Demat form, they cannot be transferred directly to another person except in the case of the death of the investor. Regulators have drawn up strict rules as the transfer of mutual funds involves changing ownership or control of one investor to another. The restrictions on the transfer of mutual funds have been set to protect investors and maintain market integrity. If free transfers are allowed, it may lead to abuse, such as money laundering or tax evasion. Furthermore, MFs are designed to be easily bought and sold in the open market, which makes the need for direct transfers negative, as units can be easily sold and repurchased. The transfer of mutual funds to the downfall of an investor in the case of the death of the primary investor, MF units are transferred by a process called transfer. Here is how the transfer of MF units takes place. If there is a co-applicant for the investment: units are automatically transferred to the co-applicant. Without a co-applicant: MF units are transferred to the nominee or legal heir, after all applicable documents, including the death certificate, have been submitted. You must provide these documents and information to have the transfer done. Death certificate of the deceased KYC details of the nominee or legal heir new bank account details Skatement mortgage loan (for large amounts). Specific requirements may depend on the mutual fund home and the number of unit holders. In addition, the nomination of a beneficiary is now compulsory for investment in mutual fund. If a nominee is not specified, investors must submit a written statement on the same. Tax implications of donated MFS Gift -MF units are taxable in terms of the ‘Income Tax Act’. But there are releases. Gifts of family members (spouse, children and siblings) are fully released, regardless of the amount in question. If MF units are given to non-relative, and if the value of such a gift exceeds £ 50000, the total amount is taxable at the recipient. If the recipient later sells the gifted MF units, it will attract capital gains tax. The donor’s cost and holding period will also be considered for capital gains tax. Any income or profits generated from MF units donated to a minor child or spouse will be taxed in the hands of the donor. But if the gift is given to parents, adult children and siblings, it will be taxed in their hands. Allirajan M is a journalist with more than two decades of experience. He works with various leading media organizations in the country and has been writing mutual funds for almost 16 years.