Switch to direct plan from Regular mutual fund Malayalam ഡയറക്ടിലേക്ക് മാറി ലാഭം പകുതിയായി

Switch from Regular plan to Direct plan of a mutual fund is nothing but selling regular units and buying direct units. So all the expenses and taxes associated with buy and sell will have to be born by the investor, RupeeMonk explains the things one should remember while switching to direct mutual fund.

Do you know about Taxes and transaction charges of Mutual funds മ്യൂച്വൽ ഫണ്ടിലെ ചിലവുകൾ
മ്യൂച്വൽ ഫണ്ട് നിങ്ങളെ കോടിശ്വരനാക്കുമോ, can all make money thru Mutual fund SIP

Are direct mutual funds really good? RupeeMonk compares direct and regular plans.
ഡയറക്ട് മ്യൂച്വൽ ഫണ്ടുകളുടെ ഗുണവും ദോഷവും

Mainly there are Two things
1. Capital gain Tax: Return on your mutual funds attract capital gains tax. How much tax you would pay depends on the type of scheme you have invested, and how much time you stayed with it. If you sell your debt mutual fund investments before a year, the returns or short-term capital gains are added to your income and taxed according the income tax slab applicable to you. If you sell your debt mutual funds after three years, returns are treated as long-term capital gains and taxed at 20 per cent with indexation benefit. Indexation help you to inflate your purchase cost with cost of inflation index and bring down your tax liability. If you sell your equity mutual funds before a year, the returns from the transaction is treated as short-term capital gains. Such gains are taxed at a flat rate of 15 per cent. If you sell your equity mutual fund schemes after a year, the returns are treated as long-term capital gains tax. Gains of over Rs 1 lakh in a financial year are taxed at 10 per cent. Gains made before January 31, 2018 are grandfathered – you need not pay any tax on those gains.A hybrid scheme that invests at least 65 per cent of the portfolio in equities will attract the taxation applicable to equity schemes. If a scheme has less than 65 per cent in equities, it is treated as a debt scheme for the tax purpose.

2. Exit Load : An exit load refers to the fee that the Asset Management Companies (AMC) charge the investor at the time of exiting or redeeming a scheme. Sometimes it also refers to commission to the fund house or pre-exit penalty, if the investor exits the fund before the lock-in period is over. Not all funds levy an exit charge. Hence, while choosing a plan, do consider the exit load too along with its expense ratio. Yes, exit fee is not part of your expense ratio. In case of open-ended funds, the investors have the choice to exit the investment plan as per their choice. Many a time, investors fail to honor the specified time period for which they had agreed to invest in a fund. So, an exit load can discourage the investors from pulling out their investments from mutual fund schemes prematurely. This fee may also reduce the number of withdrawals from the mutual fund schemes. The exit fee is usually a percentage of the Net Asset Value (NAV) of the mutual fund held by investors. Once the AMC deducts the exit load from the total Net Asset Value, the remaining amount gets credited to the investor’s account.

For instance, if the exit charge for a one-year scheme is 2% and you redeem within 6 months, this would be much before the agreed investment period. So, here it is like a early-exit penalty. If the NAV of the fund is Rs. 35 during the time of redemption, then the exit fee would be 2% of Rs. 35, which amounts to Rs. 0.7. The remaining amount, Rs. 34.30 gets credited to the investor. And if the investor completes the agreed fund tenure, then he/she needn’t pay the exit load at the time of redemption.

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