Mutual fund units cannot be directly transferred between different schemes. Instead, investors need to use the "switch" option if both schemes belong to the same fund house. In case of different fund houses, you need to redeem from one scheme and invest the money in another. This process may have tax implications and possible exit load charges, depending on the scheme rules and duration of holding.
Can You Directly Transfer Mutual Fund Units Between Schemes?
No, you cannot directly transfer mutual fund units from one scheme to another. The only way to move investments is through a "switch" (if within the same AMC) or by redeeming and reinvesting (if across different AMCs). This method involves selling units in one scheme and buying units in the other, which can be done online or offline.
What Is the Switch Option in Mutual Funds?
The switch option is available when both schemes belong to the same fund house. It allows you to move your investment from one scheme to another without redeeming the money to your bank account. The AMC handles the internal transfer. While switching, the value of your current units is used to buy new units in the other scheme at the current NAV.
What Is the Step-by-Step Process to Transfer Between Schemes?
Here’s how to do it:
1. Log in to your AMC account or mutual fund platform.
2. Choose the scheme from which you want to switch.
3. Select the new scheme where you want to invest.
4. Enter the number of units or amount to switch.
5. Submit the request. The fund house will process it based on the NAV of the day.
If switching across fund houses, redeem your investment, wait for the money to be credited, and invest it in the new scheme manually.
What Are the Tax Implications of Switching?
Switching between schemes is treated as redemption and purchase for tax purposes. For equity funds:
– If held less than 1 year, 15% short-term capital gains tax applies.
– If held more than 1 year, 10% long-term capital gains tax applies on gains above ₹1 lakh per year.
For debt funds, tax depends on the holding period and your tax slab. Always check tax impact before switching.
Are There Any Charges or Exit Loads While Switching?
Yes, some schemes charge an exit load if you redeem or switch units before a certain period, usually one year. The exit load varies from 0.25% to 1%. Check the fund’s offer document or factsheet to know the charges. Also, new schemes may have entry loads or minimum investment amounts during switching.
Why Do Investors Switch Between Mutual Fund Schemes?
Investors switch between mutual fund schemes for better returns, change in risk profile, new financial goals, or poor performance of the current scheme. Switching also helps in asset allocation – moving from equity to debt or vice versa depending on market conditions. It is a smart tool if used wisely with tax awareness.
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