Can Mutual Fund Units Be Transferred? Rules, Process & SEBI Guidelines Explained

Summary: 

• Mutual fund units can now be transferred “without redemption”.  

• Units held in demat form can be transferred between brokers or individuals using a Delivery Instruction Slip (DIS). 

• Units held in Statement of Account (SoA) form can be transferred only in eligible cases like gifting, inheritance, or adding/removing joint holders. 

• “Broker-to-broker” transfer of SoA units is still not allowed.  

• After any eligible transfer, a mandatory 10-day lock-in applies before the units can be redeemed. 

Transferring mutual fund units is the process of moving your existing mutual fund investments from one account or person to another, without selling them. In India, such transfers are governed by SEBI and “AMFI Best Practices Guidelines” circulars.  

If we talk about the specific conditions, transfers of balance units in a mutual fund usually happen in these three cases: 

1. Shift mutual fund units from one broker or demat account to another, while keeping ownership unchanged.  

2. Transfer mutual fund units to another person as a “gift”.  

3. Transfer unit balance in mutual fund to family members due to inheritance, court orders, or other legal reasons. 

It is worth mentioning that earlier, units held in the “statement of account (SOA) form” could not be transferred. To transfer a mutual fund, investors had to sell their units and repurchase them in the recipient’s name.  

The negative impact? 

This sale triggered “capital gains tax”, even though the investor did not want to exit the investment. But now, after the latest changes, investors can transfer both demat and SoA units without selling them (in specific cases).

Want to know the exact process and conditions? Read this article till the end. 

How to Transfer Mutual Fund Units from One Broker to Another? 

The process of transferring mutual funds from one broker to another depends on how your mutual funds are currently held: 

• Either in demat form or 

• In non-demat (physical or direct) form. 

Let’s understand the process in detail: 

Case I: If Your Mutual Funds are Held in a Demat Account 

When mutual fund units are held in a demat account, they can be transferred directly from one broker to another through the Depository Participant (DP) system. The ownership of the investment remains the same. The process to be followed is: 

• Request a Delivery Instruction Slip (DIS) from your current broker. This form is used to authorise the transfer of securities. 

• Enter the details of the new broker where the units need to be transferred. You must mention the new DP ID + client ID,  

• Submit the completed DIS to your existing broker or DP for processing. 

Post-completion of these steps, the mutual fund units are transferred to the new demat account within a few business days. 

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Case II: If Your Mutual Funds are Not Held in a Demat Account 

If the unit balance in a mutual fund is held in the form of SOA or non-demat form, it cannot be transferred between brokers. In this case, the only option is to: 

• Redeem the existing units and 

• Invest the money again through the new broker 

While doing so, you may attract tax implications (in the form of capital gains) + exit load charges, depending on the scheme and holding period.  

But why? 

That’s because the case of broker-to-broker transfers of units held in SoA form is still not covered in the list of eligible transfers [as provided by the AMFI Best Practices Guidelines Circular No. 116/2024–25 (14 August 2024)]. 

How to Transfer Mutual Fund Units Under Inheritance or While Gifting? 

Mutual fund units held in demat form can be transferred using the Delivery Instruction Slip (DIS) or the online transfer facility provided by the Depository Participant (DP). The process typically works as follows: 

• The unit holder submits a DIS to their DP. 

• Details of the transferee’s demat account are provided. 

• Units are debited from the transferor’s demat account. 

• Units are credited to the transferee’s demat account. 

Since the units move directly between demat accounts, no redemption or reinvestment is involved in the process. 

However, the process for transferring mutual fund units held in Statement of Account (SoA) form is different. It is governed by the AMFI Best Practices Guidelines Circular No. 116/2024–25 (14 August 2024) along with the updated provisions introduced through AMFI Circular 119/2025–26 (8 May 2025) and related SEBI directions. 

Under the updated guidelines, all individual investors (resident and non-resident) are now eligible to transfer mutual fund units held in SoA form. The facility can be used for several purposes, including: 

• Gifting mutual fund units 

• Transfer to siblings 

• Transfer to third parties 

• Addition or removal of joint holders 

Earlier, such transfers were largely restricted to limited situations such as inheritance-related cases. The May 2025 update expanded the scope, allowing a wider set of transfers between individuals. 

Another important requirement is that SoA-based mutual fund unit transfers must be completed through online platforms only. As per AMFI guidelines, investors must submit transfer requests through authorised portals such as: 

• MF Central 

• CAMS 

• KFintech 

Physical transfer requests are not permitted for mutual fund units held in SoA form. 

Let’s now understand how the SoA mutual fund transfer process works in practice.

What This Facility Allows and Who Can Use It 

• Mutual fund units held in SoA (non-demat) mode can be transferred. 

• Dematerialisation is not required.  

• The facility applies to all mutual fund schemes except ETFs.  

• Only individual investors are eligible (both resident and non-resident individuals)  

What are the Eligible Transfer Scenarios? 

SoA-based transfers are permitted only in the following cases: 

Is Partial Transfer Allowed? 

• Yes, investors may transfer only part of their units. 

• If the remaining balance falls below the scheme’s minimum holding requirement, the balance units will be redeemed and paid to the original holder. 

What is the “Record Date” Rule? 

• If a transfer request is submitted on a dividend record date, the dividend will be paid or reinvested in the name of the transferor. 

What is the 10-Day Cooling (Lock-In) Period? 

• After transfer, the units cannot be redeemed for 10 days. 

• This period exists to detect and prevent fraudulent transfers. 

Conclusion 

So now you know how mutual fund units are transferred in India. When units are held in demat form, transfers can be carried out through the Depository Participant using a Delivery Instruction Slip (DIS). These transfers allow movement of unit balance in mutual funds without redeeming the investment. 

In contrast, when mutual fund units are held in Statement of Account (SoA) form, broker-to-broker transfers are not permitted. However, for eligible situations such as inheritance, gifting, or changes in joint holding, SoA units can now be transferred without converting them to demat form.  

This facility applies to all mutual fund schemes except ETFs and is processed online through the AMC and RTA. Additionally, a mandatory 10-day lock-in period applies after transfer, during which redemption is not allowed. 

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