Instead of a physical item, give something that grows in value—a financial gift. A mutual fund scheme or an insurance product can be more meaningful than jewellery, a new phone, clothes or sweets. You can gift them not just to family members but also to friends. Here’s how you can gift mutual funds and insurance:
How to gift mutual funds
If you are invested in multiple mutual fund schemes and wish to gift one or some of the units to your loved ones, you can do so easily. Earlier, only mutual fund units in demat form could be gifted. The Securities and Exchange Board of India (Sebi) has also allowed non-demat transfers, although awareness about this remains low. You can even gift units to non-relatives.
“The transfer of money via bank account is quite common. A similar trend will likely emerge in the mutual fund space as awareness grows about the non-demat transfer of mutual fund units. As of now, out of 100 million financial transactions that we process every month, nearly 1,000 are transfer requests,” said Anuj Kumar, chief executive, mutual fund transfer agency CAMS.
The process is simple. Both the transferor and transferee should have a running folio with validated KYC. The status can be easily checked on the registrar and transfer agent (RTA) websites—CAMS and KFintech—using PAN. If it shows ‘verified’, update your KYC using Aadhar to ‘validated’. The same applies to the transferee. In case the transferee doesn’t have any folio, she can open a zero-balance folio to receive mutual fund units.
To gift mutual fund units, visit the CAMS, KFintech, or MF Central website and look for the ‘Transfer of MF Units’ tab. Begin by checking your eligibility by entering your PAN, mobile number and email ID. If you are eligible, OTP authentication will be performed for both; if not, the transfer request will be rejected. Therefore, ensure your KYC is validated.
Next, select the mutual fund and folio you wish to transfer or gift, specify the scheme, and the number or percentage of units to be transferred. Provide the recipient’s details, including their PAN, folio number, email ID and mobile number. Once the recipient’s information is verified, pay the applicable stamp duty if the transfer is to a third party, that is, a non-relative. After successful verification, the transfer is processed and completed.
Key things to consider
From a taxation perspective, the gift will be tax-free if given to a relative, irrespective of the amount. It is tax-free only up to ₹50,000 a year in case of a non-relative.
“Relatives as per New Income Tax Code, 2025, include spouse, siblings, brother or sister of the spouse, brother or sister of either parent, any lineal ascendant or descendant (maternal or paternal), any lineal ascendant or descendant of the spouse (maternal or paternal) and spouses of brother/sister/ascendant/descendant,” said Atul Shinghal, founder and chief executive, Scripbox.
However, the recipients will have to pay capital gains tax at the time of sale. “The acquisition price in this case will be the original purchase price at which the donor had bought it. It is important to provide this information to the recipient when gifting units, ideally with the help of a chartered accountant,” Shinghal added.
He further highlighted that clubbing applies to certain relationships, shifting tax liability on future gains back to the donor. “These relationships are spouse, son’s wife and minor child,” said Shinghal.
Kumar of CAMS said the transfer typically occurs on a T+1 basis. “A redemption freeze of 10 days is applicable after the transfer as a risk-mitigation measure to prevent misuse or fraudulent transfers and ensure proper verification before the units become redeemable.”
Do you need a gift deed to execute the transfer?
“In the mutual fund context, it isn’t mandatory, but it’s considered good hygiene to have one in place from a tax compliance perspective,” he added.
How to gift insurance
Gifting life insurance policies to family and friends is possible, but there are important nuances to consider. It is not as simple as transferring mutual fund units. “Gifting a life insurance policy isn’t straightforward—you must establish insurable interest. Insurers allow only certain relationships, such as parents, grandparents, siblings and spouses, to act as proposers or payors for someone else’s life,” said Nilesh Parmar, chief operating officer, Generali Central Life Insurance.
Both term and endowment plans can be gifted, he added. “Typically, insurers may permit you to pay the first-year premium if the beneficiary is earning; if not, you can continue paying on their behalf. For term insurance, medical and financial underwriting of the life assured is done.”
When it comes to third-party gifting—that is, gifting life insurance to friends —you need to resort to assignment. You cannot pay the first-year premium in their case as a gift since insurers will not allow it without an insurable interest. With an assignment, you can transfer the policy benefits of your own insurance policy to someone else.
“Assignment means transferring your policy benefits to another person. You remain the proposer and/or life insured, but the assignee (even a non-relative) can potentially become the beneficiary of the policy,” said Parmar.
When it comes to health insurance, anyone can be the proposer and payor on behalf of family members as defined under the policy’s family clause. “These relationships include parents, parents-in-law, siblings, spouses, children, and grandchildren. The definition of family typically remains the same across insurers, barring a few exceptions. Some insurers may exclude in-laws or grandchildren, for example,” said Gurdeep Singh Batra, head-property UW (E&S), risk engg, global accounts and coinsurance, Bajaj General Insurance.
So, if you want to give a health insurance policy to a family member, you become the proposer and payor, while the family member gets the coverage. “Proposer has to be part of the policy from a coverage perspective; however, the insurer may take an exceptional call looking at the proposer’s insurance if required otherwise,” said Batra.
In case of a third-party (non-relative), you cannot become the proposer, but can support payment to your friend / relative whom you wish to support and fund to buy insurance. “If you want to gift health insurance to friends, servants or drivers working for you, you may share the fund/ payment to the concerned proposer/insured, while they are buying the policy, as third-party payments are not directly accepted by insurers as per the law of the land,” said Batra.
When it comes to taxation, since the proposer/insured will be paying the premium, she will get the tax benefit.