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Hack to Pay Zero Tax on your Mutual Fund
If you invest in mutual funds, here’s a rule you’ll want to know:
SEBI’s new rules now allow you to gift your MF units directly — in both SOA form (Statement of Account, non-demat folios) and Demat form (units held in your CDSL/NSDL demat account).
No selling. No capital gains triggered.
Why this matters for tax planning
• Gifts to relatives are fully tax-free for both giver and receiver.
(Relatives under Income Tax Act include: spouse, parents, children, siblings, siblings of spouse, siblings of parents, grandparents, grandchildren, and the spouses of all these people.)
• The recipient gets your original cost + holding period, so LTCG benefits remain intact.
• Equity funds Taxation:
– STCG @ 20%,
– LTCG @ 12.5% after 1.25 lakh if profit
A family member with unused ₹1.25 lakh LTCG exemption (Section 112A) can redeem with zero tax.
• Debt funds Taxation:
Taxed at the recipient’s slab rate, so gifting to someone with low/no taxable income can make even debt-fund gains tax-free up to ₹12 lakh under the new regime.
How to gift?
• SOA units: Use CAMS → select Transfer/Gift → verify via OTP.
• Demat units: Use CDSL Easiest / Delivery Instruction Slip (Offline) → Off-Market Gift → enter the ISIN & recipient’s demat ID.
(ELSS transferable only after lock-in; ETFs only through demat.)
Why families should use this?
Gifting lets you:
• reduce total household tax outflow,
• shift wealth efficiently,
• and keep compounding uninterrupted.
Mutual fund gifting isn’t just a gesture — it’s a tax strategy most people miss.
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