Parents can legally gift mutual fund units to their children in India under the Income Tax Act, with no tax implications for the recipient under Section 56(2)(x). The process requires the child to have a folio with the same fund house. Transfers can be initiated online via registrars like CAMS or KFintech, with a 10-day restriction on the recipient redeeming or transferring the gifted units. This process applies to units held in both demat and statement of account forms.