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Gifting an SIP: A gift for a better future
Published On , 29 Aug 2016 By ET Wealth
Gifting money during special occasions has been a part of the Indian culture for long. Lately the trend of gifting a financial product is catching up fast. Among such gifts, financial planners and advisors are professing gifting an SIP in a mutual fund scheme or a combination of schemes of various types.
What to keep in mind
For the recipients, the gift should be of value in the long term
Its value should not diminish due to inflation and taxes
Long term risks should be minimized
There should be flexibility to use the same in case of emergency
There should be flexibility to use it periodically, if needed
Gifting an SIP, especially an Equity or an Equityoriented balanced fund, satisfies all these param
One could start a regular mutual fund in the name of the recipientThen fill up the SIP form, along with the ECS mandate for direct transfer from the bank account of the person gifting the SIP
Then fill up the SIP form, along with the ECS mandate for direct transfer from the bank account of the person gifting the SIP
In case the recipient gets money occasionally, the money could be put in a short term fund and then set up a systematic transfer plan (STP) to a suitable scheme
In case the SIP is in the name of a minor, there are some restrictions about the donor, the amount of money that could be invested in each tranche etc. (Check with the fund house/an investment advisor for details
An alternate way is that the donor can start an SIP in his/her name with the recipient (minor) as the nominee and then transfer the whole amount when the recipient turns a major (Check with a qualified person for tax implications)
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