The Securities and Exchange Board of India (SEBI) has simplified the process of transferring mutual funds. Investors can transfer their mutual fund units to family members, and even add minors to a joint account when they reach adulthood.
This will no longer require a demat account. This feature is available in most mutual fund schemes, but is limited to those holding mutual fund units on their statement of account. Transferring funds to a minor’s folio or to a minor is not possible. It’s important to consider the capital gains tax due to the transfer. Equity funds may be taxed at 15 percent on short-term gains and 10 percent on long-term gains.
Rules for minors
A minor can hold units only in his or her own name. However, when he or she turns 18 and the folio changes from “minor” to “major,” he or she can add a joint account holder, such as a parent or sibling, to his or her folio.
How to transfer
Transfers can only be made through the RTA’s website. The transferee must log in with their PAN, select the scheme, and enter the details of the account to be transferred. Consent is obtained from all unit holders via OTP.
These will be the conditions
- The units being transferred must not be subject to any kind of mortgage freeze or lock-in. For example, if your mutual fund units are in a tax-saving scheme and the three-year lock-in period has not been completed, you cannot transfer them.
2. Both the transferor and the transferee must have a valid folio with the same mutual fund house. If the transferee does not already have a folio with that fund house, they must open a “zero balance folio” before initiating the transfer process. Furthermore, the KYC of both parties must be fully validated and verified.
3. Mutual fund units cannot be sold immediately after transfer. Redemption of these units will not be permitted for 10 days from the date of transfer. This is a cooling-off period to help prevent any rash or misuse.
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