Switch between different Plans of Mutual Fund Scheme

As you all know mutual fund allows investor to switch money from one mutual fund scheme to another from the same fund house, using transaction slip.

What is Switch 

Switch is process of transferring mutual fund units from one scheme to another, but currently this option is allowed schemes of same fund house.

Types of switch

1. When units are switched from same mutual fund scheme but from Dividend plan to growth plan or vice-versa

2. When units are switched from one mutual fund scheme to another mutual fund scheme, (equity or debt )

Dividend and Growth plan switch considered as redemption and new purchase, Whether as switch from Dividend Reinvestment to Dividend payout or vice-versa is considered as "Change in Mutual Fund Scheme".

Investors can opt to switch units between Dividend Plan and Growth Plan at NAV based prices. Investors can also switch into/from other select open-ended schemes.

However, investors need to be careful of entry and exit loads while switching between Debt and Equity Schemes. 

Whether it will attract any load

A switch from one scheme to the other is treated as redemption from the scheme from where it is switched out & a purchase into the scheme into which it is being switched. Thus you will be liable for any 'applicable' entry load or exit load.

How to go ahead with this switch process:

To switch, all you need to do is fill up a transaction slip, which can be downloaded from mutual fund website or detached from the bottom of your account statement. The same can be submitted at any of mutual fund official points of acceptance of transactions. 

You can submit request switch request online if having online access to your investment.

 

Tax implication on Switch

A switch from one scheme to the other is treated as redemption from the scheme from where it is switched out & a purchase into the scheme into which it is being switched. 

If Equity Mutual Fund Scheme and units are held for less than a year then will be added to your taxable income.

If Equity Mutual Fund Scheme and units are held for more than a year then tax will be NIL

If other than equity mutual fund scheme and units are held for less than a year then tax will be added to your taxable income

If other than equity mutual fund scheme and units are held for more than 12 months then 10.30% without indexation or 20.60% with indexation (10%/20%+ 3% education cess)

Applicable tax rate on mutual funds in India