Hey Sreekanth,
I have a new kind of query this time. :)
I just thought of starting a SIP for my 5 year old nephew and clearly this will go for at least 12-15 years. Now I googled little bit about ownership/KYC/tax implications etc. but didn't get clear picture. Somewhere I read that it's easier to open in name of Parent keeping nephew as nominee, probably in this case I need to provide some authorization letter every month? Or maybe if I want to open on my name, keeping him as nominee? For sure there is no way I can open a SIP for a minor without having a co-applicant. Now the co-applicant can be me or his parents. Do you know if both options are feasible and what could be pros n cons with them?
1 Answers
Hi,
You seem to be an awesome uncle :)
If you invest in his name and you being a guardian, you need to close the folio once he turns major.
My suggestion would be, you invest in your name and make him the nominee of your investments. You can invest as long as possible and then can redeem the units when required and give the corpus to him. Holding the investment in your name gives you more flexibility in managing it.
Another option can be, you can Gift the amount to your Sister, which is a tax-exempt transaction, and let her invest in her son's name being a guardian. (I am assuming that your sister can manage the investments..)
Also note that a gift received by a nephew from his uncle is not liable to be taxed according to the provisions of the IT Act, but a gift received by an uncle from his nephew is not covered under the exceptions.
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Thanks much Sreekanth ! As always most clear answer n perfect suggestion. And yes I should have thought about it earlier so that he could have more years of compounding before turning 18, not that awesome uncle I guess 😉
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