Bhai Dooj falls on 11 November, and you can gift gold ETF units to your sibling instead of physical jewellery. Anooshka Soham Bathwal said, “Off-market transfer refers to the method where an individual transfers the units of gold ETFs directly from his/her demat account into someone else's demat account.”

With Bhai Dooj falling tomorrow, on 11 November, you can gift your sibling gold ETF units instead of buying traditional gifts or spending lakhs on physical gold jewellery. This can be an alternative way to gift gold while helping your brother or sister build an investment portfolio.

However, unlike other mutual funds, gold ETFs are traded on stock exchanges and held in demat accounts. Their prices fluctuate in real time during market hours, while mutual fund transactions are based on the NAV declared by the AMC at the end of the trading day.

So, how can you gift gold ETFs, and how does the process differ from transferring regular mutual funds or gold funds? Experts explain.

How to gift gold ETFs to your sibling?

Vedant Gupte, Co-founder and CEO of investment platform Trackk, said gold ETFs exist only in demat form. Therefore, gifting them requires an off-market transfer from the giver's demat account to the recipient's account. Here are the steps involved:

Make sure your sibling has an active demat account. Get their 16-digit BO ID (CDSL) or their DP ID and Client ID (NSDL).

Register your sibling as a beneficiary through your depository's online facility (CDSL Easiest or NSDL SPEED-e) or your broker's app. Alternatively, fill in a physical Delivery Instruction Slip (DIS).

Enter the ETF's ISIN, the number of units, and ‘Gift’ as the reason for transfer.

Authorise with an OTP or TPIN, or submit the signed DIS to your depository participant (DP), such as a broker.

Once the beneficiary is registered, the transfer is usually processed quickly.

Anooshka Soham Bathwal, CEO and Founder of Dhanvesttor, said gold ETFs are dematerialised securities and can only be transferred through the demat route. Alternatively, investors can submit a physical Delivery Instruction Slip (DIS) to initiate the transfer. The process generally takes one to two business days, depending on the broker or depository service provider.

What is an off-market transfer in gold ETFs?

“Off-market transfer refers to the method where an individual transfers the units of gold ETFs directly from his/her demat account into someone else's demat account without selling on the stock market,” Bathwal said.

The transfer can take place between accounts held with the same depository or across CDSL and NSDL. However, the giver's DP may levy a small debit charge. Stamp duty treatment for gift transfers may vary, so investors should check with their DP before initiating the transaction, Gupte added.

Even a minor sibling can receive gold ETF units through a demat account operated by a guardian.

How do gold ETF gifting differ from mutual funds?

Bathwal said gold ETFs are held only in demat accounts and can be gifted only through off-market transfers, requiring both the giver and recipient to have demat accounts.

In contrast, mutual funds can be held in demat or Statement of Account (SoA) form. Eligible SoA units can be transferred through AMC and registrar platforms such as CAMS, KFintech and MF Central without requiring demat accounts, she added.

SOA is a non-demat mode of holding mutual fund units in an account maintained by the AMC or its registrar. Gupte highlighted the key differences in gifting gold ETFs and mutual funds as follows:

“If your sibling does not have a demat account, gifting mutual fund or gold fund-of-funds units held in SoA mode is a simpler alternative,” Gupte added.

Gold FoFs or mutual funds invest in units of gold ETFs and allow investors to gain exposure to gold without holding ETF units directly.

Will gifting gold ETFs or mutual fund units attract tax?

Bathwal said gifting gold ETFs or mutual fund units to a brother or sister does not attract tax at the time of transfer. Siblings qualify as relatives under the Income Tax Act, so the gift is exempt from tax in the recipient's hands, irrespective of its value. Capital gains tax also does not arise at the time of gifting, as the transfer is not treated as a sale.

Keeping a simple gift deed or letter is also advisable to document that the units were transferred without any payment, Gupte added.