What Does Joint Holding of Mutual Funds Mean?

Many mutual fund companies allow multiple investors to come together as joint holders (Maximum 3 holders) of a single fund. Though joint holding looks convenient in terms of pooling a larger sum for investment, it is way different from a joint bank account.Opting for a joint holding without specific requirements can make the transactions more tedious since it would call for signatures or consent from all the holders every time an action is required on a mutual fund.Let’s look at some of the factors to be considered before heading for joint mutual funds.

• Mode of Joint Holding: A simple "joint holding" provides equal rights to its holders and approval of all the holders are required for every transaction related to the mutual fund. Another joint holding mode is "Either or Survivor" under which either of the holders can carry out the transactions single-handedly.A joint holding is relevant in cases where the holders want to ensure that every action on their mutual fund is carried out with the consent of all the holders. The “Either or Survivor” mode is suitable in cases where the first holder wants smooth ownership transfer to their partner, in case of their death.
• KYC Requirements: It is mandatory that all the joint holders possess a PAN card and must be KYC compliant.
• Taxation: The tax implications apply only to the first holder of the mutual fund in "Either or Survivor" mode. MF schemes such as ELSS (Equity Linked Saving Schemes) are counted for tax exemption under section 80C that the first holder can avail. Similarly, any applicable tax liabilities are to be borne by the first holder only. There are no tax benefits to the holders in case of a simple joint holding without "Either or Survivor' mode.

Joint holding is beneficial in cases where pooled money is to be invested or automatic ownership transfer is desired by the first holder. Considering the above factors, you must weigh the pros and cons of a joint holding, before going for it.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.