Are you wondering what to gift your sister this Raksha Bandhan? As a brother, one of the most useful presents you can give your sister is a financially secure future. So, here are four valuable gifts that you can consider for your sister on Raksha Bandhan 2023.

Good old money
It has been a longstanding tradition in India to gift money on auspicious occasions. Raksha Bandhan is one such auspicious occasion when a brother gifts money to his sister and promises to protect her. But instead of money, a brother can gift his sister a financially secure future on Raksha Bandhan.

According to Section 56(2) of the Income-tax Act, 1961, gifts from relatives are exempt from income tax. “There is no upper limit for gifting money to siblings,” says Ankit Jain, Partner, Ved Jain & Associates. “Siblings are considered ‘relatives’ as per the Income-tax Act, 1961, so neither you nor your sister would have to pay any tax on the money exchanged as a gift on Raksha Bandhan.”

Archit Gupta, Founder & CEO of Clear, says that as your sister shares the same bloodline as yours, any gift given by you to your sister is neither taxable in your hand nor your sister’s hand.

However, if you gift money to your cousin’s sister on Raksha Bandhan, she will have to pay tax on it. “Gift received from a cousin brother will be taxable in the cousin sister’s hands. However, gifts up to Rs 50,000 per year are exempt,” Jain adds.

Mutual fund investments: Encourage her
Instead of gifting your sister cash, you could invest that money in a mutual fund (MF) scheme in her name. You can invest in MFs either through a lumpsum systematic transfer plan (STP) or through a systematic investment plan (SIP). Attractive returns from equity mutual funds have made them one of the popular investment options among millennials. It will not only appreciate the money, but it can also help your sister learn about investments.

If you invest in MFs regularly, you can also transfer some of them to her name. “As per the NSDL website, one can transfer mutual fund units from one demat account to another demat account (transfer between depository participants or DPs of NSDL) or from demat account of one depository to demat account of another depository, except for mutual fund units which are under a lock-in (say, ELSS units),” says Abhishek Kumar, a SEBI-registered investment adviser.

To transfer mutual fund units, the sender and the recipient should have demat accounts and the mutual fund units should also be in demat format, he adds.

To transfer mutual fund units within the same DP, you can log in to your DP account and add the beneficiary owner (BO) ID of the receiver. Once the DP approves the receiver, one can initiate the transfer of mutual fund units, he explains.

Since December 2022, even inter-depository transfers are allowed. So, now a NSDL account holder can transfer to a CDSL beneficiary owner ID and vice versa, Kumar says.

You can also send your sister some money and encourage her to invest in mutual funds.

Do you know you can transfer your stocks to your sister?
If you own some stocks and are wondering whether you can give these as a gift, the answer is yes, you can transfer some of your stocks or shares to her name. “Gifting stocks, mutual funds, and other investible securities to your sister is a beautiful way to express your love for her. The transaction is tax-free for both the sender and receiver. Most new-age brokers provide an effortless online way to do so,” says Ajinkya Kulkarni, Co-founder and CEO, Wint Wealth.

But the sender and receiver should have demat accounts. Sandeep Gupta, Senior Executive Group VP & Head of Dealing & Advisory-Broking & Distribution, Motilal Oswal Financial Services, says that the transfer will happen through an off-market transaction. “The sender will have to submit a delivery instruction slip (DIS) to the depository participant with the receiver’s demat account details and the stock details to be transferred. To avail tax benefit, it is recommended that both the parties get involved to execute a gift deed.”

Explaining the procedure, Kulkarni says that most platforms allow investors to log in to their account, choose the option to gift securities, enter recipient details such as name, phone number, DP ID, email address, etc, choose the security and enter the number of units. “The broker sends the recipient an email and SMS notification to accept the gift and authorise the transaction using a depository (NSDL/CDSL) TPIN. Once the recipient accepts the gift, the broker initiates an off-market gift transaction after trading hours. The charges for gift transactions may vary from broker to broker,” he says.

If your sister is a student or working professional, you can also introduce her to the capital market and guide her to invest a small amount in any passive fund such as an equity index fund to start her investment journey. You can always guide her to take some calculated risks in the stock market.

Pay for your sister’s health insurance to secure her future
Considering today’s lifestyle and increasing healthcare costs, health insurance is a must. Gifting your sister a health insurance plan can be a wonderful gift that will protect her from uncertainties.

But can you buy health insurance on behalf of your sister? Rakesh Goyal, Director, Probus Insurance Broker, says, “It is possible to buy a health insurance policy for your sister under your name. However, the policyholder (the brother) needs to have an insurable interest in the life of the person being insured (the sister). Insurable interest can be established if the policyholder is financially dependent on the person being insured or is responsible for their healthcare and well-being. Since you are family, insurable interest is established.”

When a person buys a policy for his sister under his name, the brother becomes the policyholder and will get all the communication regarding the policy. He will have to provide the sister’s medical details and health history during the proposal stage. The premium payment obligation will also be with the brother. “Any claims will be settled in the sister’s name as she is the insured person,” he adds.

But the sister’s consent is required to buy the policy under the brother’s name. Goyal says the insurance company may ask for a signed declaration from her allowing you to purchase the policy for her benefit.

“Coverage under such a policy will depend on the terms and conditions of the specific insurer. Most policies provide cashless access to sisters for treatment upon claim. However, it is highly recommended to read the policy terms well in advance to avoid any unpleasant surprises. Furthermore, one must note that such policy issuance completely differs from insurer to insurer and might not be provided by all the insurers. Also, the features and benefits might differ from plan to plan,” he explains.

All these financial investments will help your sister in the future. She will not have to borrow or dip into her savings in times of crisis if you, the brother, has helped her become financially independent. Through these investments, you could be there with her during her ups and downs and make her more financially independent and sound.