Can SEBI’s new mutual fund rules help families gift wealth more smartly?

SEBI has now allowed investors to transfer mutual fund units directly as gifts, both in demat and statement of account form, without first redeeming them. This saves exit load and avoids triggering capital gains tax at the time of the gift, so the process becomes smoother and more pocket friendly. Earlier, such gifting was practically tough for many families because units often had to be sold and re-bought, which meant tax, charges and paperwork even when the intention was only to pass on investments to loved ones.​

This change also opens up a smart way to manage tax within the family because gifts of mutual fund units to “specified relatives” are exempt from tax for both giver and receiver under income tax rules. A person in a higher tax slab can gift units to an adult child or parent with low or no income, and when that family member later redeems, the gains are taxed in their hands at their slab rate, often falling fully within the Section 87A rebate limit up to ₹12 lakh for eligible residents. So families can gradually shift part of their portfolio where it is likely to face a lighter tax bite, while still keeping the money within trusted relationships as defined under law.​

On the ground, the actual transfer is becoming quite user friendly, with many platforms enabling online requests that complete through a simple link and OTP flow instead of physical forms and multiple visits. Investors can use this facility not only for festivals and life events but also for inheritance planning, adding or removing joint holders and aligning folios with how wealth should finally move to the next generation. At the same time, people must stay mindful of clubbing rules for gifts to minors and check that the recipient really qualifies as a specified relative, so that the expected tax benefit does not get lost later.