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Gift Mutual Fund Units To Children Without Capital Gains Tax: Online Step-By-Step Guide
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Parents can now easily gift mutual fund units to children online via Demat or RTA platforms, with no gift tax under Section 56 (2).
Gift Mutual Fund Units to Children Without Capital Gains Tax: Here’s How
Parents can gift their children units held in their mutual funds without any restriction. The entire process is online and allows them to conveniently transfer the units to their children’s demat or folio.
Earlier, the process was typical with several checks and balances; however, in a series of reforms, Sebi has made the process smooth and easy.
According to Sebi guidelines, one can transfer units “off-market” without selling them. This helps avoid immediate capital gains tax.
Option A: For Units held in Demat Form
If your mutual funds are in a Demat account (like with Zerodha, Groww, or ICICI Direct):
Obtain a DIS: Get a Delivery Instruction Slip from your broker.
Fill Details: Enter your child’s Demat account details (DP ID and Client ID).
Submit Slip: Provide the slip to your broker. A nominal “off-market” transfer fee (usually around ₹25 or 0.03%) plus stamp duty will apply.
Acceptance: Your child may need to “accept” the transfer in their own demat portal.
Option B: For Units held in Physical/Statement of Account (SoA) Form
Previously, this required converting to Demat first, but new rules allow direct transfers through RTAs (like CAMS or KFintech):
Login to RTA/MF Central: Use platforms like MF Central, CAMS, or KFintech.
Select ‘Gift/Transfer’: Use the new online transfer module. You will need your child’s PAN and their existing folio number (or they must create one).
OTP Verification: Both you and your child will receive OTPs to authorize the transfer.
Stamp Duty: You will need to pay a small stamp duty (typically 0.015%) online to complete the process.
What Are Tax Implications?
The good news is that there’s no tax for gifting units of mutual funds to your children. Under Section 56 (2) of the Income Tax Act, gifting to “relatives” is exempt from gift tax.
But what you need to know is clubbing provision. If you gift to a minor, any income or capital gains generated from those units will be “clubbed” with your income and taxed at your slab rate.
For children over 18, the clubbing rule does not apply. Any future gains will be taxed in their hands.
When the child eventually sells the units, their “cost of acquisition” is considered to be the original price you paid, and the holding period starts from the date you first bought the units.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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January 10, 2026, 17:43 IST
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RBI has summoned senior officials of Yes Bank following a major data breach involving the Yes Bank–BookMyForex multi-currency forex card
Reserve Bank of India headquarters in Mumbai.
The Reserve Bank of India (RBI) has summoned senior officials of Yes Bank following a major data breach involving the Yes Bank–BookMyForex multi-currency forex card, two people aware of the development told The Economic Times (ET).
According to the report, card details and CVV numbers of several users were allegedly compromised. The central bank has sought a detailed explanation from the bank on how its systems may have been breached and the sequence of events that led to the exposure of sensitive customer data.
“The RBI has sought a comprehensive briefing from Yes Bank’s senior management on the root cause of the breach, the timeline of events, and the adequacy of the bank’s cybersecurity framework,” one of the persons cited by ET said. “The regulator wants clarity on how sensitive card data, including CVV numbers, may have been exposed and what immediate containment measures have been implemented.”
Yes Bank declined to comment on the RBI’s queries but said an internal investigation had identified fraudulent transactions involving 15 merchants in a Latin American country on February 24. Transactions worth Rs 2.54 crore were approved across 5,000 customers, while 688 unauthorised attempts amounting to around Rs 90 lakh were blocked. The bank said it is working with the card network to initiate chargebacks and ensure that affected customers do not face financial losses.
Separately, BookMyForex said it does not store customers’ sensitive card information and that its systems were neither breached nor compromised during the period in question.
The RBI has also sought details on how sensitive card data—particularly CVVs—was stored and protected, whether encryption and prescribed security protocols were followed, and why existing cyber controls failed to prevent the breach. In addition, the regulator is reviewing the timeline of detection and reporting, the robustness of third-party risk management and oversight, the number of customers impacted, and the steps taken to block cards, prevent misuse and mitigate losses. It has also asked for clarity on internal accountability, supervisory lapses and remedial measures to prevent a recurrence, ET reported.
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February 26, 2026, 07:53 IST
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