This Raksha Bandhan, many investors are choosing to gift mutual fund units instead of traditional presents. By transferring units of an equity or balanced fund, the giver not only gives a present that can grow with the market but also introduces the recipient to a diversified portfolio. The move has gained traction as the RBI’s recent relaxation on cross‑border transfers makes it easier for NRIs to participate, while the Securities and Exchange Board of India (SEBI) has clarified that transfers to minors are permissible under a custodial account. The process is simple: the donor logs into the fund house’s online portal, selects the ‘Transfer Units’ option, and provides the beneficiary’s PAN and account details.
If the recipient is a minor, a parent or guardian must sign a custodial agreement. 5% of the value or a flat ₹50, whichever is lower, and the donor can claim a 30% deduction under Section 80G for the amount transferred. Capital gains tax on the gifted units is borne by the recipient, who will be taxed at the applicable slab when they sell. Gifting units can also affect ongoing Systematic Investment Plans (SIPs).
If the donor’s SIP is linked to the same account, the plan will continue uninterrupted; however, if the SIP is tied to the donor’s name, it will cease once the units are transferred. For investors watching the Nifty and Sensex, such gifts can subtly shift exposure to sectors that the recipient may not have considered, potentially influencing market sentiment over the long term. Before proceeding, verify that the mutual fund’s scheme has a transfer facility, check the tax implications, and keep a copy of the transfer receipt for future reference. By gifting units this Raksha Bandhan, you can combine celebration with a smart investment strategy that benefits both the giver and the recipient.