I have been making direct online investments every month in equity schemes of various fund houses through SIP and STP route since five years. From January 2013 all fund houses created two NAVs for each scheme. Investors who invested before January 2013 are in Regular Plan and those investing after December 31, 2012 are in Direct Plan. I want to know if it will be beneficial for me to switch my regular plan investments into direct plan?
- Trishar Boruah
Since you have been investing in mutual funds without any intermediary, all your SIP and STP made after January 1, 2013 will go into direct plans of the respective funds. However, you will have to send a switch request to the respective fund house to switch investments made before January 01, 2013.
But remember that switch means redemption as well as a subsequent purchase. Although you don't have to pay any exit load on switching as you invested directly into the fund but you will have to pay short-term capital gains tax (STCG) at the rate of 15 per cent plus 3 per cent cess tax on investments which have not completed 12 months, and applicable securities transaction tax. Therefore, you should switch your existing investments to direct plan only if they are at least one year old, or wait for them to complete one year before switching.
This article was originally published on May 02, 2013.
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