Can I Gift Mutual Fund Units held in SoA mode to my mother under relatives of the Income Tax Act?

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Kannan Iyer

10 Points Joined May 2020

Hello Experts

Can I GIFT Mutual Fund Units held in Statement of Accounts (SoA) mode to my mother under "relatives" under Section 56(2) of the income Tax Act?

Can my mother claim the units so received from me as "Gifts received from relatives" ?

And if my mother redeems the units, how the LTCG arising from the redemption be treated ? Will it be clubbed with my income or can my mother file income tax returns as my mother's income?

Replies (5)

Let us this transaction break into 2 parts.

1st Transaction - Gift of mutual Fund to a Mother :

Since Relative includes mother. As per sec 2(47) of Income Tax act 1961, Transferring mutual fund is not regarded as a transfer and hence, in Your hands Capital gain will be exempted. Mutual Fund received from Son by way of gift will be exempted in hands of mother.
Yes Mother can claim the exemption provided u/s 56(2)(x) of income tax act.

2nd Transaction - Subsequent Sale of units of mutual fund by a mother :

It will be treated as separate transaction. Mother will be required to file ROI u/s 139 of income tax act and need not to be included in your Income. Sale of units of mutual fund by a mother will attract a capital gain and period of holding starts from the day on which previous owner bought till date of sale and accordingly capital gain tax will be paid.

Kannan Iyer

10 Points Joined May 2020

Thanks for your valuable reply .

May I know whether I can transfer Mutual Fund Unts kept under Statement of Account Mode (SOA) mode to another person's name without having to redeeming by me ? (As you know, equity shares kept in demat more can be transferred to another person's name by way of "OFF-MARKET" transfer Online...)

Jayasurya B

CA Finalist

161 Points Joined July 2022

Yes, you can transfer units of mutual funds kept under statement of Account Mode(SOA) to another person without redemption, provided you have to follow certain terms & conditions before transfer. it is advisable to contact your broker app or platform. They can guide you to process of transfer.