India’s market regulator, the Securities and Exchange Board of India (SEBI), has proposed a new mechanism that could make gifting mutual funds as simple as giving a voucher. The proposal aims to allow investors to use prepaid payment instruments (PPIs), such as gift cards, to purchase and transfer mutual fund units.

Key Highlights

• SEBI proposes mutual fund gifting via prepaid instruments, simplifying investing and boosting retail participation in India.
• New framework enables gift cards for mutual funds, enhancing accessibility and promoting financial inclusion nationwide.

The move is designed to “simplify and popularise mutual fund investing,” while boosting retail participation and financial inclusion across the country.

Under the proposed framework, investors may soon be able to gift mutual funds digitally, making them suitable for occasions like birthdays, weddings, and festivals. This aligns with SEBI’s broader push to modernise investment access and encourage long-term savings habits.

The proposal builds on recent regulatory changes that have already made gifting easier. SEBI now allows direct transfer of mutual fund units—including those held in statement of account (SOA) form—without requiring redemption.

Earlier, investors had to sell units and repurchase them in the recipient’s name, triggering capital gains tax and additional costs. The new system removes this hurdle, making the process seamless and tax-efficient.

Key Features of the Proposal

• Mutual fund units could be gifted via gift cards or prepaid instruments
• A proposed limit of Rs 50,000 per gift
• Validity of such instruments may extend up to one year
• Transactions will be monitored to prevent misuse

Also Read: SEBI Revamps Goal-Based Investing with New Life Cycle Funds Framework

This move aims to formalise investment gifting for occasions such as weddings, birthdays, and festivals—shifting preferences from cash gifts to long-term financial assets.

Gifting mutual fund units is legally permitted and does not attract capital gains tax at the time of transfer, as such transactions are not treated as “transfer” under tax laws. Experts note that this allows families to optimise tax planning by redistributing investments among members in lower tax brackets.

If implemented, SEBI’s proposal could turn mutual fund gifting into a mainstream financial practice—combining convenience, tax efficiency, and long-term wealth creation in one simple step.