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Can Mutual Funds Be Transferred?

•6 min read•Updated on 14th May, 2026•by Angel One
Mutual fund units held in demat form can be transferred between individuals during their lifetime via an off-market transfer. However, transmission of units can only occur upon the death of the unitholder.
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Investors often ask the question, “Can mutual funds be transferred?”, especially when they want to transfer them to their loved ones or families. It seems quite easy to transfer mutual fund units. However, there is a difference in this case. Mutual fund units normally remain in the name of the investor throughout their life. Mutual fund units are transferred only after death, either through nomination or legal claim.

Key Takeaways

●        Mutual fund units usually cannot be transferred between individuals while alive; transmission happens only after the investor’s death.

●        Nomination plays a key role, helping smooth the transfer of mutual fund units to rightful claimants.

●        Without a nomination, legal heirs must provide documents, which can delay and complicate claim procedures significantly.

●        Direct transfer is restricted, so investors often redeem and reinvest instead of shifting ownership during their lifetime.

Transmission/Transfer of Mutual Fund Units

Transfer of mutual fund units is a restricted process. Mutual fund units held in demat form can be transferred between individuals during their lifetime via an off-market transfer. Units held in the statement of account (SOA) form may now also be transferred under SEBI's updated framework. In both cases, however, restrictions and regulatory requirements apply, and direct transfer between individuals remains uncommon in practice.

However, transmission is done after the death of one of the unit holders, when units are transferred to nominees, joint holders, or legal heirs. If it is the case of a single holder, then the nominees need to produce certain documents in order to receive the units. In the case of joint holders, the surviving joint holders need to provide certain documents along with death certificates.

In the case of a single unit holder

If the unitholder has not declared any nominee, the units are transmitted to the legal heirs upon the death of the unitholder. This is based on the succession certificate, will, or legal heirship certificate.

In case of more than one unit holder

The surviving unitholder (joint holder) must submit a transmission request form (T2) together with the papers if the deceased was the first holder. It is a possibility that the second or third unitholder might pass away. In this instance, the surviving unitholder(s) must fill out form T1 and request that the name of the deceased 2nd and/or 3rd holder be removed.

The surviving unitholder would also need to present the following:

●        The deceased's death certificate, duly signed by a Gazetted Officer or

●        A Notary Public,

●        A new bank mandate form,

●        A cancelled check of a new bank account (only if the previous bank mandate is changed),

●        A new nomination form,

●        A new KYC form (s).

If a son or daughter wishes to inherit their parents' mutual fund investments

Only after the unit holder's death can the transmission take place. If the unitholder is still living, his or her children's names can be added, or the unitholder can withdraw monies and transfer them to his or her offspring.

Also read about: What is Mutual Fund Unit?

The documents that need to be submitted vary according to whether there is a nominee and the size of the claim amount.

●        When there is a nominee, everything remains uncomplicated. The nominee needs to submit a claim form, a death certificate, proof of identification, and banking information.

●        In case there is no nominee, legal heirs will have to provide some more documents. This can include documents showing the relationship with the deceased, documents proving their identity, and banking information.

●        In cases of amounts under the threshold, an indemnity bond and affidavits by the heirs may have to be submitted.

●        In cases where the amount is large, legal documents become important. It can be a probated will, succession certificate, or court order. These documents serve the purpose of verifying ownership and avoiding any disputes in the future.

Also read about: How to do KYC for Mutual Funds?

What Happens if the Unitholder Does Not Name a Nominee?

If the nominee does not exist at the time of transfer of the mutual fund, then the procedure for mutual fund transfer to the nominee can become quite cumbersome. It will not be possible for the fund house to transfer the units to an individual. It will become necessary for all legal heirs of the account holder to claim the investment. Where nomination is not present, there might be some delay. There could also be problems between the legal heirs. That is why it is recommended that the procedure for mutual fund transfer to a nominee be initiated in advance.

Based on the latest SEBI guidelines, the threshold for simplified transmission has been significantly increased.

●        Individual Affidavits to be given by each legal heir.

●        NOC from other Legal Heirs, where applicable, if the transmission amount is up to ₹5 lakh (for physical holdings) or ₹15 lakh (for demat holdings).

●        Individual Affidavits from each legal heir and any one of the following documents:

○        Notarised copy of Probated Will;

○        Succession Certificate issued by a competent court; or

○        Letter of Administration or court judgement, in case of Intestate Succession, if the transfer amount is more than ₹5 lakh (for physical holdings) or ₹15 lakh (for demat holdings).

Note: For claims below these thresholds, you must also provide a notarised Indemnity Bond in the prescribed format.

Awareness of the Transferability of Mutual Funds

Investors lack adequate knowledge regarding the transferability of mutual fund units. There is an assumption that the transfer or gifting of units will not pose any difficulty. In truth, there are limitations on the same. First and foremost, the process involves nomination. Investors need to confirm that all their portfolios have nominees. They have to match their names with those recorded in the database. It will also prove helpful for investors to keep themselves up-to-date regarding certain aspects. There might come a situation where the family dynamics necessitate changes.

Also read about: Is Mutual Fund Switching Beneficial?

Conclusion

The question “Can Mutual Funds Be Transferred?” has a straightforward answer, which may sometimes not be fully understood. The transfer of mutual funds between individual investors is not frequent. In most instances, the transfer is done through transmission when the investor dies. As such, nomination takes centre stage in this aspect. It makes the process more convenient for all parties. In its absence, other measures might prove to be tiresome. This is because nomination is a key process that investors ought to consider in any investment procedure. This ensures that all your money stays protected.

FAQs

The solution to Can Mutual Funds Be Transferred between DPs depends on the type of holding that you have chosen. If you hold your mutual fund units in Demat form, then you can easily transfer them from one account to another through off-market transfers. But this doesn't mean transferring them from one individual to another.

In the case of Demat holding, it is important to understand if mutual funds can be transferred between DPs using a delivery instruction slip. You need to share the necessary information about the two accounts from which the funds will be transferred. You can move your holdings between two accounts belonging to the same individual without any hassles.

No, you cannot transfer mutual fund units between two individuals directly while both of them are alive. You may have to redeem the units and make an investment in another name. You cannot transfer units between two individuals, except by transmission on death.

The cost depends on the method. Transmission usually has minimal or no charges. However, if units are redeemed and reinvested, exit loads and taxes may apply. For Demat transfers, small charges may apply depending on the depository. It is important to check details before initiating any movement.

Yes, but with some conditions. Direct transfer of MFs from one person to another cannot happen in physical or statement form. Transfer to nominees or legal successors can take place. But in other instances, the investor should consider redeeming and investing back again.

It depends on the kind of transfer being asked for. In case of Demat investments, investors should contact the depository participant. In case of other non-Demat investments, the fund houses take care of transmission. Where individual transfers have to be made, the route of redeeming and buying units again holds good.

Sometimes yes, most often not. The taxation of the transfer of mutual funds depends on whether the investor redeems their units. If capital gain taxes apply, then their applicability will depend on the duration of investment and the mutual fund scheme itself. Taxation does not apply in case of transfers to nominees, but applies later when redeemed by the nominees.

For a nominee to claim mutual fund units when the investor is no longer alive, the nominee needs to follow certain steps, such as filling out the claim form, providing a death certificate, and also providing identity proof to the concerned mutual fund company. After successful verification of all the above documents, the units get transferred to the nominee’s name.

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