You can transfer non-demat MF units online. Here's how

New online feature allows mutual fund holders to transfer SOA units to relatives, third parties

- Sashind Ningthoukhongjam

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.

The changes are being rolled out in phases. In phase 1, which went live on 14 November 2024, three key features were enabled: (i) Surviving joint holders can now add new joint holders to a folio after the death of a co-holder. (ii) Nominees can transfer units to legal heirs upon the demise of the unit-holder. (iii) When a minor turns 18, they can add parents, guardians, or siblings as joint holders to their account.

In phase 2, starting 19 May 2025, the system allowed full transfer of units to relatives and third parties, and enabled 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 (as per Sebi) and not as a trustee of the eventual heir. 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 online transfer work?