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Economic Times
12-07-2025
- Business
- Economic Times
Groww introduces demat for mutual funds. What does it mean for investors?
Groww, a leading investment platform in India, introduces a new feature. Investors can now hold mutual fund units in demat format. Groww, one of India's leading digital investment platforms, has rolled out a new feature that allows investors to hold mutual fund units in dematerialised (demat) format. The company's co-founder and COO, Harsh Jain shared on his social media platform linkedin about the new feature. The post mentioned that over the past year, many users expressed interest in holding mutual funds in demat format and now Groww is excited to announce that this feature is live, bringing investors a unified way to manage all their investments. Also Read | Glenmark Pharmaceuticals shares rally up to 20%, mutual funds lead the charge over retail investors Until now, the mutual fund holdings on Groww platform were maintained in Statement of Account (SoA) format which served investors well, and millions began their mutual fund journey through the platform. Other offerings such as stocks, ETFs, and bonds—all of which are managed in demat format. Groww said that maintaining updated bank and nominee details across multiple folios in the SoA format had become unnecessarily complex. According to the investment platform, this move came in response to growing demand from customers for a more streamlined approach and the mutual fund investments on Groww will now default to demat mode after the team has worked hard over the past few months to improve this process. The investment platform said that the demat option will help investors manage all their investments —mutual funds, stocks, ETFs, and bonds— at one place in a single demat account. Updating bank account details is easier now and the redemptions will go straight to the bank account linked to the customer's Groww profile. In the demat option, multiple nominees can now be added in one go, across all investments. For those who invest exclusively in mutual funds, the demat format simplifies account management so that details like bank and nominee information are accurate and up-to-date. For investors who prefer to stay with the SoA format, Groww remains one of the few platforms that continues to offer this choice as well, the investment platform said. 'Existing investments will continue to be in SOA format, and there will be an option to move to demat if the customer wants to do so,' Groww said in a blog post. Also Read | Investors' pour Rs 47,000 crore in midcap & smallcap mutual funds in H1 CY25. What are they really chasing? According to a blog post by Groww, the benefits of holding mutual funds in demat format includes seamless bank updates, easy nominee management, pledging option, and simplified management. Using a demat option, investors can easily update bank details, and redemptions go directly to your demat-linked account, can assign multiple nominees to all your mutual funds in a ratio of your choice with just one click, use mutual fund units held in demat form as collateral for trading, and one can consolidate all their investments—mutual funds, stocks, ETFs, and more—into a single demat account, the blog post said.
Mint
17-06-2025
- Business
- Mint
Now, you can transfer mutual fund units held outside demat to others. Here's how
In a major shift for mutual fund investors, units held in Statement of Account (SoA) form — that is, outside of demat accounts — can now be transferred to relatives or even third parties entirely online. This long-standing restriction has been eased with new features rolled out by mutual fund registrar and transfer agencies (RTAs), opening up new flexibility for investors looking to gift or restructure their holdings. Until recently, mutual fund units could only be transferred between parties if held in dematerialized (demat) form. But with the latest changes, unitholders in non-demat form can carry out transfers directly via RTA websites like CAMS and KFintech. Read this | Invest in mutual funds for your children? Here's what to do when they turn 18. The changes are being rolled out in phases. In phase 1, which went live on 14 November 2024, three key features were enabled: Surviving joint holders can now add new joint holders to a folio after the death of a co-holder. Nominees can transfer units to legal heirs upon the demise of the unitholder. When a minor turns 18, they can add parents, guardians, or siblings as joint holders to their account. In phase 2, which began on 19 May 2025, the system allows full-fledged transfer of units to relatives and third parties, and enables adding or deleting joint holders — all through a few simple online steps. 'By allowing spouses to be added as joint holders, the transmission in the event of death becomes easier. A joint holder is essentially inheriting in its own right and not as a trustee of the eventual heir. In a way, a joint holder is a shared heir rather than a nominee, who is required to transfer the amount to the legal heir," said Harsh Roongta, a registered investment advisor (RIA) and founder of Fee Only Investment Advisers. 'Allowing such additions will reduce the burden during hard times." How does the online transfer work? Investors must first visit the MF Central website and select the asset management company (AMC) whose units they wish to transfer. Once the AMC is chosen, MF Central automatically redirects the user to the respective registrar and transfer agent (RTA) platform — CAMS or KFintech — depending on which agency services that AMC. Alternatively, investors can log in directly via the relevant RTA website. The transferor, who must be an individual (minors are excluded), needs to enter their PAN, folio number, email address, and mobile number, and specify whether the transfer is to a relative, a third party, or intended as a gift. This choice is critical, as it determines the subsequent tax treatment. (More on that shortly.) Both the transferor and transferee must have 'KYC validated' status. Those who completed KYC using Aadhaar typically have validated status already. Following OTP verification on both email and mobile for the transferor, they select the mutual fund units and quantity they wish to transfer. The RTA will automatically verify that the units are free of any lock-ins, freezes, or liens before proceeding. Next, the transferee's details are entered, including their folio number. 'If the balance units in the transferor's folio falls below specified threshold / minimum number of units as specified in the Scheme Information Document (SID) of the respective MF scheme, such residual units shall be compulsorily redeemed, and the redemption amount will be paid to the transferor," stated Amfi (Association of Mutual Funds in India) on its website. Importantly, the transferee must have an active folio with the same AMC. For example, if Mr. A wants to transfer HDFC Mid Cap Opportunities to Mr. B, Mr. B must first open a folio with HDFC AMC. To facilitate this, Amfi instructed AMCs via a letter dated 14 August 2024, to enable zero-balance folios so recipients without existing folios can still receive transferred units. Read this | Mutual fund mis-selling: What the first public disclosures reveal Once both parties complete OTP verification, the transfer request is initiated. According to Amfi, the transaction should be reflected within two working days. To safeguard against fraud, the transferred units are locked from redemption for 10 days. Units are transferred on a first-in, first-out (FIFO) basis, meaning the oldest units are transferred first. Tax implications: Transfer vs gift Crucially, unitholders must carefully select whether they classify the transaction as a transfer or a gift, as tax treatment differs significantly. 'While transferor can choose any of the option while transferring units, considering the tax implications that vary with each scenario viz., gifting of units/transfer to third parties/transfer to legal heir etc, transferor/transferee is advised to consult with their tax consultant before initiating the transfer," said ES Varadarajan, Chief Risk & Process Officer, CAMS. According to Prakash Hegde, a Bangalore-based chartered accountant, when a transaction is classified as a transfer, tax authorities treat it as being done for consideration, triggering capital gains tax for the transferor. 'The sale consideration minus cost of acquisition is considered as capital gains. The transferor needs to pay applicable tax on the gains," he explained. The latest available NAV is used for calculating stamp duty. For instance, if Mr. A initiates a transfer at 4 pm on Wednesday, Tuesday's closing NAV will be used to compute the consideration value and the applicable stamp duty (@0.015%) payable by the transferor, since Wednesday's NAV will only be published late at night (typically around 11 pm). However, for capital gains purposes, the applicable NAV will be based on the actual settlement date of the transfer, treated as a redemption for the transferor and a purchase for the transferee. In contrast, if the transaction is classified as a gift, the transferor is exempt from capital gains tax since no consideration is received. However, if the recipient is a non-relative and the value exceeds ₹50,000, the recipient must pay tax on the entire gift amount, as income from other sources, at their applicable slab rate. 'For instance, if the gift is worth ₹75,000, tax will apply to the entire amount based on the recipient's slab rate," Hegde noted. The NAV at the time of transfer is used to calculate the value of the gift. Separately, a stamp duty of 0.005% applies to all transfers (whether to relatives or others), but gifts are exempt from stamp duty, Varadarajan of CAMS clarified. What should investors keep in mind? Abhishek Kumar, RIA and founder of Sahaj Money, advised investors to factor in the mandatory 10-day lock-in following a transfer before units can be redeemed. "They should plan liquidity needs accordingly so they are not caught off guard," Kumar said. Also read | The ONDC mutual fund pipeline has arrived. Will it take over the industry? He also cautioned that the eventual cost of acquisition for the recipient depends on whether the transaction was treated as a transfer or gift — a key factor that will affect future capital gains tax when the units are eventually sold. Moreover, only units free of lien, lock-in, or freeze are eligible for transfer, Kumar emphasized.
Business Mayor
09-05-2025
- Business
- Business Mayor
Sebi proposes allowing investment advisers, analysts to use liquid MFs for deposit requirements
Markets watchdog Sebi on Friday proposed allowing investment advisers and research analysts to use liquid mutual fund units, with a lien marked in favour of the regulatory body, to meet their deposit requirements. This would be in addition to the option to maintain the deposit with the bank. Under the Sebi rules, investment advisers (IAs) and research analysts (RAs) are required to maintain a deposit with a bank, which is marked as a lien in favour of the relevant supervisory body. The compliance with the deposit requirement is one of the conditions for the registration as IA or RA. This requirement needs to be fulfilled on a continuous basis to keep the registration in force. Currently, they are required to comply with this requirement by June 30, 2025. However, Sebi has received representations from IAs and RAs, whereby they highlighted about facing practical issues about opening fixed deposit accounts and a lien marking the same in favour of the Administration and Supervisory Body. They cited difficulties such as inconsistent procedures across bank branches, delays in issuing required documents, confusion around Sebi's lien marking rules and limited awareness among bank staff. Accordingly, in its consultation paper, Sebi has 'proposed to accept lien marked liquid mutual fund units as deposit for compliance with the deposit requirement under IA Regulations and RA Regulation. Lien on such units of mutual fund shall be marked for at least one year'. Sebi noted that liquid mutual funds are generally low-risk and easy to convert to cash. Read More Invesco unveils trio of future-focused thematic ETFs It suggested that these mutual fund units can be held in Statement of Account (SOA) or demat form. The value of these mutual funds, after deducting exit load and a specified haircut, will be counted toward the deposit. The value should be reviewed annually. If it falls below the required threshold or if more deposit is needed due to more clients, the IA or RA should top it up by adding more. The Securities and Exchange Board of India (Sebi) has sought public comments till May 29 on the proposal. READ SOURCE
