How transmission of mutual fund units works | The Financial Express

How transmission of mutual fund units works

Transmission is the process of transferring mutual funds from the original, deceased investor to their nominee.

All you want to know about the transmission of mutual funds
If the sale of the units results in capital gains, the new investor inheriting the assets will be liable to pay long term capital gains (LTCG) or short term capital gains (STCG) tax.

Mutual fund investments are a popular choice for meeting long-term financial goals. Sometimes, however, the original investor’s demise leads to a situation where the nominee or legal heirs inherit the accumulated units. In such a case, nomination plays a vital role in the transfer of assets.

Transmission is the process of transferring mutual funds from the original deceased investor to his/ her nominee. It involves the authentication of details and documentation procedures and can take one to three weeks to conclude.

Soumee Bhatt, General Counsel,, says, “To redeem the invested funds, the nominee should ideally initiate the transfer process without delay. The fund house may request certain documents, such as the primary investor’s death certificate, KYC, Form T3, etc. Keep the required documents ready when placing your request.”

Let’s look at the documents a nominee must furnish for transferring a deceased investor’s units to their name.

Form T3: Form T3, also called the Transmission Request Form (TRF), is for transferring units in favour of the nominee. It is available online on the fund house’s website and offline at their branch. Once obtained, the claimant must fill in the necessary details such as their KYC, contact information, address, and bank account information. They must also provide the deceased unit holder’s name and date of demise and scheme-related details like names, folio number, number of units, and claimant’s allocation. In the case of a single nominee, the allocation is 100%. In the case of two or more nominees, the allocation percentage specified by the deceased investor in the records must be mentioned.

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Death certificate: A copy of the deceased investor’s original death certificate is required for placing a unit transmission request. Most fund houses also accept a photocopy of this document that a notary public or gazetted officer has attested.

Birth certificate: If the nominee is a minor, a copy of their birth certificate is required for the transmission process.

KYC acknowledgement: The nominee has to provide a KYC acknowledgement to declare they are KYC-compliant. If no KYC is available, the nominee must submit copies of their PAN and address proof to fulfil the KYC requirements.

Cancelled cheque: The nominee needs to provide a cancelled cheque leaf with their name pre-printed. They can also submit a copy of their bank statement of the last three months.

Attested signature: For transfer amounts up to Rs 2 lakh, the bank manager must attest the nominee’s signature. If the amount is above Rs 2 lakh, the nominee’s signature must be attested by a Notary Public or First Class Judicial Magistrate. In the case of a minor nominee, their guardian’s signature has to be attested.

What if the nominee is not registered?

If a nominee or legal heir is not registered under the investment, they will need to provide additional documents, based on the amount, as part of the transmission process. For amounts up to Rs 2 lakh, here are the documents to be submitted:

1. Proof of relationship between the claimant and deceased investor – Driving licence, Aadhaar Card, or a Voter ID Card

2. Bond of Indemnity

3. Individual affidavits by each legal heir

4. No objection certificate (NOC) from other legal heirs

If the transfer amount is over Rs 2 lakh, the nominee or legal heir must provide, in addition to individual affidavits by each legal heir, any of the following documents:

1. Notarised copy of Probated Will 

2. Succession Certificate by a competent court 

3. Letter of administration or court decree, in case of Intestate Succession where the deceased has passed on without leaving a will or testament.

Taxation of the transferred units

Nominees who have received the transferred units must observe a 15-day cooling-off period, during which they cannot liquidate, transfer or switch the units. After this period, the nominee can liquidate the units, provided the original scheme does not have a lock-in period, a common feature of tax-saver schemes.

If the sale of the units results in capital gains, the new investor inheriting the assets will be liable to pay long-term capital gains (LTCG) or short-term capital gains (STCG) tax. This tax will depend on the date the original investor purchased the units.

If the new investor sells the units within a year of purchase by the original investor, the recorded gains will attract a 15% STCG tax. If units are held for over a year, starting from the date the original investor purchased them, they will attract an LTCG tax of 10% payable by the new investor on gains above Rs 1 lakh. Gains up to Rs 1 lakh are not taxable. However, owing to the grandfathering provisions for capital gains, very long-term capital gains derived up to 31 January 2018 will not attract a capital gains tax.

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Adhil Shetty, CEO,, says, “One has to be mindful of tax liability with regard to mutual funds. It is advisable to check the impact that LTCG and STCG tax may have on the funds one has received from the late investor. Read the policy document or consult the seller to understand the policy before taking any action.”

Debt schemes, on the other hand, will be taxed differently. STCG tax will be levied based on the investor’s tax slab; Long-term capital gains on debt schemes will attract an LTCG tax of 20% post indexation benefits.

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First published on: 14-12-2022 at 00:15 IST