How to Transfer Mutual Funds from Regular to Direct Plan

If you started investing in mutual funds through a bank, broker, or distributor, chances are you are in a Regular plan. Regular plans have higher expense ratios because they include distributor commissions. Switching to a Direct plan can save you significant money over the long term. This guide explains how to transfer your mutual funds from regular to direct plan.

What Is the Difference Between Regular and Direct Plans?

Every mutual fund scheme in India is available in two variants:

• Regular plan: Includes a distributor commission (typically 0.5% to 1.5% per year) built into the expense ratio. You invest through a broker, bank, or distributor.
• Direct plan: No distributor commission. You invest directly with the AMC or through platforms like Bachatt. The expense ratio is lower.

Both plans invest in the exact same portfolio managed by the same fund manager. The only difference is the expense ratio — and over time, this difference compounds significantly.

How Much Can You Save by Switching to Direct?

Let us look at a concrete example. Suppose you have ₹10 lakh invested and the expense ratio difference between regular and direct is 0.75%:

• Over 10 years: You save approximately ₹1.2 lakh
• Over 20 years: You save approximately ₹4.5 lakh
• Over 30 years: You save approximately ₹12 lakh

That is ₹12 lakh saved on a ₹10 lakh investment — just by being in the direct plan. The savings are even larger when you continue adding money through SIPs.

How to Transfer from Regular to Direct Plan

Unfortunately, there is no simple “convert” button. A transfer from regular to direct is treated as a redemption from the regular plan and a fresh purchase in the direct plan. Here is the process:

Method 1: Switch Within the Same AMC

If you want to stay with the same fund house (e.g., move from HDFC Large Cap Regular to HDFC Large Cap Direct):

1. Log in to the AMC website or an investment app that offers direct plans (like Bachatt)
2. Select your regular plan holding
3. Choose “Switch” as the transaction type
4. Select the Direct plan of the same scheme as the target
5. Enter the amount or units to switch (partial or full)
6. Confirm the transaction

The switch will be processed at the applicable NAV, typically within 1-3 business days.

Method 2: Redeem and Reinvest

If the AMC does not support a direct switch or if you want to move to a different AMC’s fund:

1. Redeem your units from the regular plan
2. Wait for the proceeds to reach your bank account (1-3 business days)
3. Invest the amount in the direct plan through a direct platform or the AMC website

Important Considerations Before Switching

Tax Implications

Since a switch is treated as redemption + purchase, capital gains tax will apply:

• Equity funds held less than 1 year: Short-term capital gains taxed at 20%
• Equity funds held more than 1 year: Long-term capital gains above ₹1.25 lakh taxed at 12.5%
• Debt funds: Gains taxed at your income tax slab rate

Calculate the tax impact before switching. If you have large unrealized gains, consider switching in phases across financial years to utilize the ₹1.25 lakh LTCG exemption each year.

Exit Load

If you have not completed the exit load period (usually 1 year for equity funds), you will pay exit load on the switch. Check your fund’s exit load policy before proceeding.

ELSS Lock-In

If your regular plan investment is in an ELSS fund, you cannot switch until the 3-year lock-in period for each instalment is complete.

What About Your Existing SIPs?

Switching your existing units does not affect your running SIP. You need to separately:

1. Cancel your SIP in the regular plan
2. Start a new SIP in the direct plan through a direct platform

Make sure the new SIP is set up and the first instalment is processed before cancelling the old one, so there is no gap in your investing.

Platforms for Direct Plan Investment

You can invest in direct plans through:

• Investment apps like Bachatt: The easiest option with full portfolio tracking
• AMC websites: Direct access but limited to one fund house
• MF Central / MF Utilities: Government-backed platforms for direct plans

Step-by-Step Strategy for Switching

1. List all your regular plan holdings with invested amounts, current values, and holding periods
2. Calculate potential tax on gains for each holding
3. Check exit loads for each fund
4. Switch holdings with no exit load first
5. For high-gain holdings, switch in phases across financial years to optimize tax
6. Set up new SIPs in direct plans immediately
7. Cancel old SIPs in regular plans once direct SIPs are running

Switch to Direct Plans with Bachatt

Bachatt makes the transition from regular to direct plans smooth and hassle-free. Our app identifies your regular plan holdings, calculates the tax impact of switching, and helps you move to direct plans systematically. Start saving on unnecessary commissions today.

Download the Bachatt app and make the switch to direct plans — keep more of your returns where they belong, in your pocket.