According to the Securities and Exchange Board of India (SEBI), every mutual fund scheme issued by Asset management company comes in two varieties : regular and direct funds. Both of them have their own benefits and drawbacks. Let’s Discuss how to switch mutual funds in details.
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What is Switching Mutual Funds?
Each mutual fund requires a unique investment approach. There may be instances when a fund isn’t functioning well and the fund’s value drops, or you don’t want to risk it. In such cases, you might use the switching option. Let’s discuss how to do so within the same AMC or in the other AMCs.
How to Switch Mutual Funds?
There are different processes to switch the mutual funds from the same AMC and to other AMCs.
switch in mutual fund within the Same Company
For better financial planning, investors move their money from one open ended scheme to another within the same fund institution. Fill out a switch form giving the amount/number of units to be switched from the source scheme and the name of the destination scheme if switching within the same fund house.
For all switch-in and switch-out plans, you must meet the minimum investment amount conditions. While moving, there may be exit-load and capital gains tax consequences.
So because money does not leave the fund house, there is no need to bother regarding the settlement time for a transition within the same fund house.
switch in mutual fund between two different Company
It’s the same as selling one fund and reinvesting in another when you move from one scheme in Mutual Fund A to another scheme in Mutual Fund B. You can request redemption from the first Mutual Fund and then wait for the funds to arrive in your bank account.
When redeeming your investments, keep exit loads and tax implications in mind. Once you have received the credits from the first fund, fill out the application form for the Mutual Fund where you want to reinvest the income.
Fund advisors can also assist you in selecting the appropriate funds for a changeover.
When People Generally switch in mutual fund?
- If you wish to switch from debt to equity funds or the other way around.
- If you’re switching from a regular to a direct fund, here’s what you need to know.
- If you want to invest in a fund that would provide you better returns.
- If you’re looking to go from a growth to a dividend fund.
Mutual Fund Switch Charges
There are three major things you need to keep in your mind while calculating Mutual Fund switch charges:
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Tax
Although mutual fund transactions are subject to capital gains tax, you will be subject to either short-term or long-term capital gains tax. It is termed reclamation if you switch from an old fund to a new one, or if you switch across schemes.
For example, if you switch from a regular to a direct plan, you will be subject to capital gains tax. The switching phase is seen as redemption in this scenario, and hence the tax is imposed. The tax rates for long and short-term funds are shown in the table below:
| Fund | Time period | Capital Gains Tax % |
|---|---|---|
| Equity fund | Short term – Less than 12 months | 15% |
| Equity fund | Long term – More than 12 months | 10% |
| Debt fund | Long term – 36 months and above | 20% with indexation |
| Debt fund | Short term – Less than 36 months | As per Income tax Slab rates |
If more than 65 percent of money are invested in equity mutual funds, the tax rate for hybrid funds will be the same as for equity funds.
Exit Load
This is a proportion of the NAV (Net Asset Value) of a mutual fund unit that the investor has chosen. It is a fee charged by an asset management organisation when you sell or redeem mutual fund units.When you sell a mutual fund unit, the AMC deducts the exit load fee and credits the remaining money to you.
If you’re thinking about switching mutual funds, think about how much of an exit penalty you’ll have to pay if you sell throughout the lock-in period.
Lock in Period
You will not be able to swap mutual funds with a three-year lock-in term, such as the Equity Linked Savings Scheme (ELSS). Furthermore, you cannot withdraw the amount deposited; nevertheless, you can decide to suspend an ongoing SIP.
If you want to transfer money from one fund to another, you can do so online or in person. You can change mutual funds as often as you like, either partially or completely.
It’s up to you to decide why you want to relocate, but you should consider the tax and exit fees you’ll have to pay in return.
how much time it takes to switch mutual fund Online?
Sign in to your mutual fund account(either through the AMC or through 3rd-party providers like,Groww, CAMS or KARVY). You can buy, change, or redeem your fund units on the transaction page.
After selecting the ‘switch’ option, click on the appropriate fund name and other details. The adjustment will take four working days to take effect.
how much time it takes to switch mutual fund Offline?
You can transfer funds offline. However, it is not as easy as it was in the online option. You must go to the fund house’s local branch and fill up and submit a changeover form.
Fill in the details, including the Folio Number and the name of the fund. They’ll send you an updated account statement once they’ve processed it. You can even do it through your broker.
Conclusion
If you wish to create wealth in the short term, you must switch between the mutual funds from time to time according to the trends. It will surely help you in getting extra profit if things go right & your mutual funds are able to generate better profits.
This is all from our side regarding what is switch in mutual fund? Although, if you have any doubts about how to switch sip from one fund to another online you can just comment below and to open account with Groww click here
Other Interesting blogs related to switch in mutual fund.
SIP Investment is Good or Bad?
Mutual Funds in Demat Account Pros and Cons
How to Invest in Mutual Funds without Demat Account
FAQ About how much time it takes to switch mutual fund
How to switch SIP from one fund to another online?
If you want to switch sip of the same AMC you can do it from the transaction page. In case of other AMC you need to takeout the money and then you can start sip in new fund after getting the money in your bank account.
How much time it takes to switch mutual fund?
Normally, it takes 4 working days to switch mutual funds from one to another.
How to switch mutual funds online?
Sign in to your mutual funds account. Click on the transaction option.There will be an option to switch your mutual funds. Click on the option and fill in the required details.
Mutual fund switch taxation
Depending on your Holding period the mutual fund switch taxation is decided - it can be long-term or short term capital gain tax which starts from 10% & can up to 20%.
Mutual fund switch cut-off time
mutual fund switch cut-off time is 03:00 Pm expect liquid and overnight schemes which have 01:30 pm Time.
