Why not gift a mutual fund this Diwali?

You can set up a SWP to deposit a fixed sum periodically in the accounts of your relatives

Festival season is a time to catch up with friends and relatives and exchange gifts to celebrate the occasion. When it comes to gifting, my wife always comes up with wonderful suggestions. So, some weeks ago, at our dinner discussion about Diwali gifts, she suggested I should think of ways of gifting mutual funds to close family members.

This got me thinking on this option, especially for our close ones. Gifting is not just about exchanging expensive presents and sweets; it is also about seeking the blessings of our elders and blessing those younger to us. So, here I am gifting something different to my daughter, siblings and parents this Diwali.

Tailor-made and flexible

For my daughter, my elder sister and mother, I am setting up a systematic withdrawal plan (SWP), which is nothing but the opposite of a SIP. The idea is to create a fixed sum to be paid to them periodically on a specified date. The money gets credited to their bank accounts.

I have invested in a growth-oriented mutual fund and initiated the SBI MF Bandhan SWP for them by specifying their details, the withdrawal amount and the duration of SWP. This gift is for the next year, and I plan to continue this for a longer period for all of them. In fact, my daughter can also start her own SIP from this amount and create investment of her own, which promises her financial independence in future.

Implementing SWP is simple. I have to just submit proof of our relationship, besides getting their KYC compliance done with necessary documentation such as PAN and bank account details to which the money will be credited. The beauty of these investments is that the onus of investment is all mine. For them, the investment proceeds is a gift that can be used in any manner they wish to.

Also, the tax implication on any investment gain/loss will be borne by me (the investor) and not by the person who gets the investment proceeds. That’s because the ownership of the financial asset/investment lies with the one who makes the investment, even though the beneficiary is a different person.

In mutual funds, there is also the provision of joint-holding between two individuals. So, for those looking for a long-term gifting option, they could get into investing with a relative, wherein you can invest for the long term. One can mention the investment holding with KYC compliance for both the investors, with investment mode as ‘joint’ or ‘either or survivor’, to avoid any future complications.

You also have the option of gifting mutual funds to your employees. As organisations tend to give a bonus to employees during Diwali, this year they could think of a mutual fund as bonus. The Diwali bonus can be deposited in their mutual fund folio in a particular scheme and the KYC of the employees can be done before gifting them the investment. In fact, this could be a good incentive to get employees to start investing.

Armed with all these options and suggestions, I sat with my wife to make this Diwali different for our immediate family members and hope they find it unique and appealing. For those of you reading this, I hope I have kindled a different idea and thought process to view mutual funds as not just any financial product, but one which can be a wonderful gift to change the financial lives of people.

The writer is ED & CMO, SBI Mutual Fund

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