What do you gift someone who wants to start investing but doesn’t know where or how to begin?
The Securities and Exchange Board of India (Sebi) may have an answer.
In a recent consultation paper, Sebi proposed the introduction of Gift Prepaid Payment Instruments (Gift PPIs) — prepaid cards or digital vouchers that can be bought and gifted, and redeemed only for investment in mutual funds. The idea was originally proposed by AMFI (Association of Mutual Funds in India).
Think of it like an Amazon or Flipkart gift card. You load it with money and hand it over. But instead of shopping, the recipient can use it only to invest in a mutual fund scheme.
How it works
has proposed two pathways for scheme selection, recognising that many recipients will be first-time investors.
In the first pathway, the card purchaser — the person gifting the card — may suggest a mutual fund scheme at the time of purchase. However, this suggestion is not binding. Sebi has explicitly clarified that this does not amount to investment advice or a recommendation under Sebi’s rules.
The recipient can invest in the scheme suggested by the gift giver or make his or her own choice. In either case, the transaction will be processed under the direct plan, which carries no distributor commission and therefore a lower expense ratio.
In the second pathway, the recipient may choose to consult a mutual fund distributor for assistance on selecting the scheme. In that case, the investment is routed through the regular plan, which includes distributor commission within the fund’s expense ratio.
The choice rests entirely with the recipient.
Once invested, any redemption proceeds — the amount received when units are sold — are credited only to the recipient’s own registered bank account.
What are the limits
has proposed a clear set of rules to keep the framework simple and prevent misuse.
The maximum value of each Gift PPI is ₹10,000— in line with RBI (Reserve Bank of India) rules on prepaid instruments. The card cannot be reloaded once issued. Crucially, the entire amount on the card must be invested in one go — no partial use, no balance sitting around.
If the recipient does not use the card within one year of its issue, the money is automatically refunded to the original card purchaser’s bank account.
“The RTAs (registrar and transfer agents), on behalf of AMCs (asset management companies) will track how much each investor has invested per AMC per financial year through Gift PPI, e-wallets and cash. If the transaction resulting from a Gift PPI redemption crosses ₹50,000, the RTA will reject the transaction, and the PPI face value will be refunded to the issuer’s escrow account,” Sebi said in its consultation paper.
Funding is permitted only through bank transfer or UPI.
The safety checks built in
Mutual fund regulations prohibit third-party payments — meaning investments must originate from the investor’s own bank account.
The gift card structure works around this through ownership validation.
Before redemption, the registrar and transfer agent (RTA) conducts a third party validation (TPV) check to verify that the name on the gift card matches the name on the mutual fund folio. If they do not match, the transaction is rejected and the money refunded.
This ensures the gift cannot be misused to invest on someone else’s behalf.
The cost of issuing the card — including co-branding or platform fees — will be borne by the AMC, not the gift giver or recipient.
What this means for investors
Income tax rules on gifting apply here too.
“As long as the gift is from a non-relative within the ₹50,000 threshold, it will not create a tax event for the recipient under income from other sources. If it is above ₹50,000, the total gift amount will be taxable in the hands of the recipient. If the gift is by spouse, sibling, parents, etc. these are exempt from tax,” said a Mumbai-based chartered accountant and founder of Nimit Consultancy.
Since each card is capped at ₹10,000, a single gift from a friend or colleague stays well within the ₹50,000 threshold and will not be taxed. However, this ₹50,000 limit is aggregate. Recipients receiving multiple gifts from non-relatives must keep track of the total.
Capital gains tax rules remain applicable when the investments are eventually withdrawn by the card recipient.
India’s industry has expanded rapidly in recent years, driven by steady SIP inflows. Yet onboarding first-time investors — especially in smaller cities or among younger earners — remains a challenge.
A gift card could simplify the entry journey.
Instead of navigating KYC, opening a folio and selecting a fund in one step, the process becomes gradual. The recipient redeems the card, completes KYC — a one-time requirement — creates a folio and invests. The folio remains active for future investments.
Amol Joshi, founder of Plan Rupee Investment Services, draws a parallel with gold investing. “Like gold gifting has evolved with gold coins, mutual funds gift cards can also gain more traction. This is an ideal way to get a first-time investor to try mutual funds,” he said.
If implemented, the proposal could shift how investing is introduced — from a complex financial decision to something as simple as giving a gift.