How to switch a Mutual Fund from Regular to Direct Plan

If your email ID is linked to the folio, you need to login to the portal of the fund house and select the switch option. If not, you will have to visit the office of the fund house

Intro👋

If you know which mutual fund you want, it is always better to buy a direct mutual fund since it eliminates the commission deducted by AMCs as fees for distributors (the person or entity who had facilitated the transaction(s) for you to invest in the fund). The difference between TER of regular and direct plan normally varies between 0.5% to 1.5%.

Charges 💰

Switching a mutual fund is just two transactions of selling a fund (the regular plan), and buying another fund (the direct plan) from same AMC in a single order. Because of this, you will attract either STCG (Short term Capital Gains Tax) or LTCG (Long term Capital Gains Tax). You may also attract exit load if applicable and TDS for NRIs

Since the LTCG is lower, it would be better to convert the mutual fund units which are eligible for LTCG as and when the mutual fund units become eligible for it. Platforms like Paytm Money, Groww, INDMoney, Kuvera (with their tradesmart feature) etc. are offering this feature along with the option to convert just those units to direct mode if you need. You may opt for STP (Systematic Transfer Plan) to convert the required unit in a fixed frequency if you need.

Options for preforming the switch 🛣️

There are two modes by which you will be able to perform the switch

  1. Online Mode

  2. Physical Mode

Online Mode💻

This is the easiest method for switching a fund.

  1. Login to the fund house or Mutual fund platform website (Create account if you don't have)

  2. Select the fund you need to switch

  3. Stop the existing SIP (if you don't, the SIP in regular fund will continue to get processed)

  4. After selection, you will be presented with options like switch, redeem etc.

  5. Select switch and then select the fund to which you would like to switch

  6. Then select whether you would like to do switch for full investment or partial.

  7. Once you do the authorization by means like OTP after this, you will get a confirmation that the fund is under process for switching.

Offline Mode📄

If you have an old fund where the email ID is not updated, then this is the only option for you.

  1. Go to the office of the fund house and ask for the form to do the switching

  2. You will be receiving a communication from them once the fund is switched

  3. If the fund house doesn't have that facility offline, ask for form to redeem the fund. Once the fund is redeemed and the amount credited to your account, invest via offline by filling the purchase form or online

For any schemes having lock-in period like ELSS fund, switching can happen only after the period. You may use STP for this.