How to Gift Stocks & Mutual Funds in India (2025 Guide)

Have you ever thought of gifting something more meaningful than gold, gadgets, or cash? In 2025, a new trend is emerging. People are looking at gifting stocks and gift mutual funds as smart, future-ready presents. Imagine giving your loved one not just a gift, but a share in India’s growth story, whether it’s a blue-chip company, a Nifty 50 stock, or a long-term wealth-building mutual fund.

But the big question remains: Can you really gift stocks or mutual funds in India? The answer is yes. From a father transferring shares to his daughter, to friends gifting each other mutual funds for financial milestones, the practice is gaining traction. And thanks to better regulations, digital demat systems, and awareness about stock gift tax rules, this concept is no longer complicated.

In this blog, we’ll break down exactly how to gift stock, the right way to gift mutual funds, and the tax rules you must know before transferring them. If you’re looking for unique gifts for stock market lovers, this guide will show you why financial assets are becoming the most thoughtful gift of all.

What Does It Mean to Gift Stocks or Mutual Funds?

When we think of gifts, we usually picture something tangible – jewelry, gadgets, or maybe even cash. But in today’s digital world, financial assets like stocks and mutual funds are also being passed on as gifts.

So, what does gifting stock actually mean? It’s the process of transferring ownership of shares from your demat account to someone else’s account, for example, giving your sibling a few Nifty 50 stocks on their birthday. The shares move legally into their name, just like you’d transfer property or any other asset.

Similarly, when you gift mutual funds, you’re transferring your units in a mutual fund scheme to another person’s folio (investment account). This makes them the rightful owner, who can either hold or redeem those units later.

Think of it this way: instead of giving money that may be spent immediately, you’re gifting an investment that could grow over time making it one of the most thoughtful gifts for stock market lovers or anyone starting their financial journey.

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Traditional Gifts vs. Financial Gifts

Aspect	Traditional Gift (Cash/Jewelry)	Gifting Stock / Mutual Funds
Value Over Time	Often depreciates/spent	Can grow with market performance
Transfer Process	Simple handover	Needs demat/KYC & paperwork
Tax Rules	None	Governed by stock gift tax rules
Ownership Proof	Informal	Officially recorded in demat/folio

Is It Legally Possible to Gift Stocks or Mutual Funds?

Yes, it is completely legal to gift stocks and mutual funds in India.

Here’s why:

Regulatory Framework

• Stocks are held electronically in demat accounts through depositories (NSDL/CDSL). SEBI allows transfer of securities between demat accounts, including as a gift.
  
  
• Mutual funds are managed by AMCs/registrars (like CAMS, KFintech). They also allow transfer of units as long as both parties are KYC compliant.
  
  

Gift Tax Act & Income Tax Act

• There is no separate gift tax in India today. Instead, the Income Tax Act governs gifts.
  
  
• If you transfer stocks or mutual funds to a relative (as defined by law – parents, siblings, spouse, children, etc.), it’s exempt from taxation.
  
  
• For non-relatives, if the market value of gifted stocks/mutual funds exceeds ₹50,000, it is treated as taxable income in the recipient’s hands.
  
  

Ownership Rights

• Once transferred, the recipient becomes the legal owner.
  
  
• Future capital gains tax liability applies to them when they sell, not to the giver.
  
  

Suggested Read: Top Tax Planning Strategies for a Profitable 2025

How to Gift Stocks in India?

Gifting stocks is not as simple as handing over a certificate or writing a cheque-it involves a regulated transfer through demat accounts. Here’s how the process works step by step:

Both Parties Must Have Demat Accounts

• You can only gift shares electronically.
  
  
• The giver (donor) and receiver (donee) must have demat accounts with either NSDL or CDSL. Without it, the transfer cannot happen.
  
  

Initiating the Transfer: Offline vs Online

Verification & Processing

Charges

Proof of Transfer

• Once processed, the recipient can see the shares in their holdings statement.
  
  
• This serves as legal proof of ownership transfer.
  
  

Example: If you own 10 shares of Infosys and want to gift them to your daughter, you can:

How to Gift Mutual Funds in India?

Unlike stocks, where you transfer shares via demat accounts, gifting mutual funds works slightly differently. The process depends on whether the mutual fund units are held in demat form or in a folio with the Asset Management Company (AMC).

Both Parties Must Be KYC-Compliant

• The donor and recipient must complete KYC (Know Your Customer) formalities with PAN, Aadhaar, and bank details verified.
  
  
• Without KYC compliance, fund houses will not process the transfer request.
  
  

Transfer Process via AMC/Registrar (Physical Folio)

• Fill in a transfer request form available with the AMC or its registrar (like CAMS or KFintech).
  
  
• Provide details such as folio number, scheme name, number of units to transfer, and the recipient’s details.
  
  
• Submit it along with identity proofs.
  
  
• Once approved, the units are transferred to the recipient’s folio.
  
  

Transfer Process via Demat Account (Electronic Form)

• If your mutual funds are held in demat form, the transfer is similar to gifting stock.
  
  
• You’ll fill a Delivery Instruction Slip (DIS) with your DP, mentioning ISIN codes of the mutual fund units.
  
  
• After verification, the units will be credited to the recipient’s demat account.
  
  

Costs & Timelines

• AMCs generally don’t charge fees for unit transfers.
  
  
• Depository Participants may charge a nominal fee (₹20-₹50 per ISIN).
  
  
• Processing usually takes 5-7 working days.
  
  

Restrictions

• Some AMCs may not allow partial transfers in specific schemes.
  
  
• ELSS (Equity Linked Savings Scheme) funds with a 3-year lock-in cannot be gifted until the lock-in period ends.
  
  

Example: Suppose you’ve invested in an SIP in SBI Bluechip Fund and want to gift 100 units to your nephew. If you hold them in physical folio, you’ll submit a transfer form to CAMS. If they’re in demat, you’ll simply use a DIS slip through your broker. Either way, once processed, your nephew becomes the legal holder of those 100 units.

Tax Implications of Gifting Stocks and Mutual Funds

When you gift stocks or gift mutual funds, two sets of tax rules apply:

• Gift Tax Rules (for the recipient)
  
  
• Capital Gains Tax (when the recipient sells)
  
  

Let’s break this down.

Gift Tax Rules in India

• Under the Income Tax Act, Section 56(2), gifts of money or property (including stocks and mutual funds) are taxable if their value exceeds ₹50,000 in a year.
  
  
• Exemptions: If the gift is received from a “relative” (spouse, parents, siblings, children, grandparents, etc.), it is fully tax-free, regardless of the value.
  
  
• Non-Relatives: If you gift stocks worth ₹1 lakh to a friend, the recipient must pay tax on ₹1 lakh as “Income from Other Sources” in their ITR.
  
  

Capital Gains Tax (for the recipient when selling)

• The donor (giver) does not pay capital gains tax when gifting.
  
  
• The recipient becomes the legal owner, and when they sell, capital gains tax applies.
  
  
• Importantly, the cost of acquisition and holding period of the donor are carried forward.
  
  

Example

• You bought 50 Infosys shares in 2020 at ₹800 each and gifted them to your son in 2025 (current value ₹1,600).
  
  
• No tax at the time of gifting.
  
  
• If your son sells them in 2026 at ₹1,700, he will be taxed on capital gains calculated from your original purchase price (₹800), not the 2025 gift value.
  
  

Tax Rates

• Equity Shares & Equity Mutual Funds
  
  
  • Holding < 1 year: 15% Short-Term Capital Gains (STCG).
    
    
  • Holding > 1 year: 10% Long-Term Capital Gains (LTCG) beyond ₹1 lakh (without indexation).
    
    
• Debt Mutual Funds
  
  
  • Gains are taxed as per slab rates (since April 2023, indexation benefit removed).
    
    

Quick Reference Table

Scenario	Tax Treatment
Gift to relative (any value)	No gift tax
Gift to non-relative ≤ ₹50,000 (per year)	Tax-free
Gift to non-relative > ₹50,000	Taxable in recipient’s hands as Income from Other Sources
Recipient sells gifted stock/MF later	Capital gains apply; donor’s cost & holding period used

Benefits of Gifting Stocks and Mutual Funds

While traditional gifts like jewelry or gadgets have emotional value, they often depreciate or lose relevance over time. On the other hand, when you gift stocks or gift mutual funds, you’re offering something that can appreciate and create long-term wealth.

Here are the key benefits:

Long-Term Wealth Creation

• A stock or mutual fund gift is not just money, it’s an investment that grows with India’s economy.
  
  
• For example, gifting Nifty 50 stocks or a blue-chip mutual fund today could double or triple in value over a decade.
  
  
• Unlike consumable gifts, these can support life goals like education, marriage, or even retirement.
  
  

Financial Literacy & Discipline

• Gifting investments encourages recipients, especially younger ones, to learn about stock markets, SIPs, and wealth-building.
  
  
• It creates early exposure to financial planning, something cash gifts often fail to do.
  
  

Personalized & Thoughtful

• Unlike generic gifts, you can align the investment with the recipient’s interest.
  
  
  • Example: Gifting renewable energy stocks to an eco-conscious relative.
    
    
  • Or gifting a child-focused mutual fund to a young niece/nephew.
    
    

Liquidity & Flexibility

• Stocks and mutual funds are liquid assets; they can be sold anytime when funds are needed.
  
  
• Recipients have the freedom to hold, switch, or redeem based on their goals.
  
  

Tax Efficiency (with Relatives)

• As explained earlier, gifts to relatives are fully exempt from gift tax.
  
  
• This makes financial gifts both efficient and legal compared to cash or property transfers.
  
  

Example: Imagine gifting your daughter 20 shares of HDFC Bank on her 18th birthday. Instead of fading in memory, that gift grows with her potentially funding her higher studies or first home in the future.

Risks & Things to Keep in Mind When Gifting Stocks or Mutual Funds

While gifting stocks or gifting mutual funds is a powerful way to pass on wealth, there are certain risks and conditions that both the giver and receiver should understand.

Market Risk

• Stocks and mutual funds are subject to market fluctuations.
  
  
• The value of the gift may decline due to volatility, especially in the short term.
  
  
• Example: Gifting Nifty 50 stocks during a bull run might look impressive, but if the market corrects, the recipient could see the value drop.
  
  

Tax Complications

• For non-relatives, gifts above ₹50,000 are taxable under stock gift tax rules.
  
  
• Recipients may face unexpected tax liability if they are unaware of these rules.
  
  
• Capital gains taxation could also feel confusing since it’s based on the donor’s original purchase price.
  
  

Liquidity Restrictions

• While most mutual funds are liquid, ELSS funds have a mandatory 3-year lock-in.
  
  
• If you gift locked-in funds, the recipient cannot redeem them until the period ends.
  
  

Documentation & Compliance

• The gifting process requires accurate demat or folio details.
  
  
• Errors in ISIN codes, PAN details, or signatures can delay transfers.
  
  
• Both parties must be KYC compliant, which may be a barrier for those new to investing.
  
  

Emotional & Practical Readiness

• Not every recipient may appreciate or know how to handle financial gifts.
  
  
• Someone unfamiliar with markets may panic-sell instead of holding long term.
  
  
• It’s often wise to educate recipients about what they’re receiving.
  
  

Quick Tip: If your goal is simple, consider gifting mutual fund gift cards or investing in a beginner-friendly index fund before transferring complex assets.

Alternatives to Direct Gifting of Stocks and Mutual Funds

If the idea of filling out forms, handling demat transfers, or explaining tax rules feels overwhelming, don’t worry, there are easier ways to give financial gifts without directly transferring your stocks or mutual funds.

Mutual Fund Gift Cards

• Several AMCs in India now offer mutual fund gift cards.
  
  
• These work just like store gift vouchers, but instead of shopping, the recipient can invest in a mutual fund of their choice.
  
  
• They’re beginner-friendly and make great gifts for stock market lovers who are just starting their journey.
  
  

Thematic or Child Gift Funds

• Some AMCs offer child-focused gift funds, designed to help parents or relatives invest for a child’s education or future goals.
  
  
• These are structured as long-term investment plans with an emotional appeal.
  
  
• Example: A ₹10,000 investment today in such a fund could grow into several lakhs by the time the child reaches adulthood.
  
  

ETFs and Index Funds

• Instead of gifting individual shares, you can gift Nifty 50 ETFs or index funds.
  
  
• These are diversified, lower-risk, and easier for the recipient to hold long term.
  
  
• Example: A one-time gift in a Nifty 50 index fund exposes the recipient to India’s top companies, without stock-picking risks.
  
  

Sovereign Gold Bonds (SGBs)

• For relatives who prefer safer assets, SGBs make an excellent gift.
  
  
• They combine the emotional appeal of gold with annual interest (2.5%) and long-term capital appreciation.
  
  

GIFT City Investment Options

• India’s GIFT City stock exchange has been promoting innovative investment products for global investors.
  
  
• While not yet mainstream for retail gifting, it represents the future of financial gifting as cross-border investment becomes easier.
  
  

Example: Instead of gifting 5 random stocks, you could gift your cousin a Nifty 50 ETF unit. This way, they own a slice of India’s top companies without the stress of monitoring individual shares.

Bottom Line

In today’s world, where traditional gifts often lose their shine over time, the idea of gifting stocks and mutual funds stands out as both thoughtful and forward-looking. It’s not just about giving money, it’s about transferring an investment that can grow, compound, and contribute to someone’s financial journey. Whether it’s gifting stock in a blue-chip company, transferring mutual fund units, or exploring options like Nifty 50 ETFs, you’re offering something that carries real long-term value.

Yes, there are processes to follow – demat accounts, KYC, and paperwork. And yes, stock gift tax rules mean you need to be mindful of who the recipient is. But with relatives, the process is tax-efficient, legal, and rewarding. For non-relatives, as long as you’re aware of the ₹50,000 exemption rule, it can still be a smart choice.

For those who prefer simpler routes, mutual fund gift cards or child-focused gift funds offer ready-made solutions.

At the end of the day, this trend is more than financial, it’s symbolic. To gift an investment is to gift a future. And in 2025, that might just be the most meaningful gift of all.

Disclaimer: Investments in securities market are subject to market risks. Read all the related documents carefully before investing. The securities are quoted as an example and not as a recommendation.

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