How to convert existing MF Folios to Direct Plan?

POSTED BY Sunnydoc ON January 8, 2013 7:26 pm COMMENTS (16)

Hi,

I wanted to know the procedure to convert my existing MF SIPs to the ‘Direct’ plan. I had selected the mutual funds myself after doing my own research, but had walked into a Karvy office because I didn’t know where else to go. 🙂

I have active SIPs running, so what is the process to switch to a direct plan now? Will I incur an exit load on my investments if I make the switch? Should I stop my existing SIPs and start fresh folios in each of my fund choices? I do not wish to incur an exit load or tax, so what is the best way to approach this?

Sunnydoc

 

16 replies on this article “How to convert existing MF Folios to Direct Plan?”

  1. Sanket Shirodkar says:

    Hello Sir
    Is it possible to stop regular plan SIP & start new SIP in same fund with Direct plan & redeem regular plan SIP amount once your SIP comes under long term capital gain (LTCG) ?
    instead of paying short term capital gain, exit load & switching formality ?

    1. Yes you can do that, you just need to fill a form with AMC for that !

  2. Sunnydoc says:

    So if I have bought an MF through an AMC directly, which I intend to do so in case of ‘Direct’ investment, I will not be charged STT on redemption?

    But doesn’t that mean I will have to pay income tax on my Long Term Capital Gains in the future, as mentioned by Ramesh?

    Sunnydoc

  3. Don’t worry much about STT.
    STT is @ rate of 0.250% only applicable on selling of units directly to AMC.Means for redemption amount of Rs.10000/- STT payable will be only Rs.25/-.
    AMCs will directly debit this tax from redemption amount & need not to be paid separately.
    No STT for buying units through AMC.

  4. Sunnydoc says:

    So STT is a good thing? Could you please elaborate a little more?

  5. Sunnydoc says:

    I was just browsing on the net. Does this STT apply only if I have purchased mutual funds through a trading platform, or is it applicable even if I have purchased it offline through an AMC or broker?

    Sunnydoc

    1. Ramesh says:

      Everywhere, and on every selling whatever the time period.

      If an equity-based instrument does not have STT applied at time of selling, it will not be available for LTCG of 0% after holding for a period of 1.0 years.

  6. Sunnydoc says:

    Could you please explain this securites transaction tax with regards to equity oriented mutual funds?

    Suppose my exit load is NIL after holding a particular mutual fund for more than a year, what is my STT?

    Pardon my ignorance, could someone please describe this STT with a scenario? Is there any way to avoid STT, or is it part and parcel of purchasing a equity oriented mutual fund?

    Sunnydoc

  7. bharat shah says:

    i just summarize the cost involve in switch from existing scheme to direct scheme(effective 01012013) of the same mf:

    1. exit load as applicable for existing scheme investment through broker/agent/adviser , but not for existing investment made direct i.e. without any broker/agent/adviser.exit load is not applicable for reverse switch from new direct scheme to existing scheme (i.e. with adviser etc.).
    2. capital gain tax long term or short term would be applicable as per prevailing i.t. law . of course AMC would not deduct on this account.
    3.Security Transaction Tax (STT) will be deducted for all sale of existing equity schemes at rate of 0.25% for any equity mf switch. for debt mfs , there is no STT.
    in addition to usual benefits, i think, we can book LT capital gain for more than 1 yr equity mf investment before new tax code , by which that benefit may be taken away

  8. Sunnydoc says:

    Dear Ashal,

    Thanks for the advise, will do it that way.

    Sunnydoc

  9. Dear Sunnydoc, the easy way. Stop old plans, register yourself for direct plans. Redeem the money after 1Y or so. Why? AMCs are charging exit load on conversion from normal to direct plan. Specially where the broker code is there (in your case, it’s Karvy any how, to get the trail commission).

    Thanks

    Ashal

  10. I mean to say, could I directly approach the respective AMCs and fill a fresh form to start a fresh SIP?

    Yes. That is what I mean

  11. Sunnydoc says:

    Thanks again!

    I mean to say, could I directly approach the respective AMCs and fill a fresh form to start a fresh SIP? I am aware there will be a bit of legwork involved, but I guess it should be worth it!

    Yes you are right about the change in exit load patterns. Will have to keep a close watch before redeeming or switching. 🙂

  12. If they dont have an office and if they dont do it online then it is a problem. You could call and ask them if you could mail it to them

    Is it easier to just fill a form and start a fresh SIP? The labour involved is the same in terms of paperwork and technically its the same process!

    of course it will be easy if an agent sells direct schemes. But why would they!

    if you are switching from a MF which you had invested through a broker (Karvy) then there will be an exit load if redeemed before 1 year for each sip transaction.You need to check reg. this wrt each amc the loads also may vary and some have only recently increased it to deter this switch!

  13. Sunnydoc says:

    Thanks Pattu, I still need some clarifications though. So basically I need to first approach individual AMC offices, get a form and fill it. What if that particular AMC does not have an office in my town?

    Can someone clarify the potential charges incurred for making such a switch?

    Is it easier to just fill a form and start a fresh SIP? Can I transfer my older SIPs afterwards? Say after a year or whatever time the exit load does not apply?

    Sunnydoc

  14. get an account from individual AMCs.

    Some like HDFc will want a paper form filled up and given to the nearest office

    for some like UTI MF, Quantum you could register online. Depends on the AMC

    Once you register, map your existing porfolio no to your account.

    Then you request a switch to a direct scheme,

    Read the terms and conditions for switching before doing so.

    involves some labor but worth it

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