How-to regular plan direct plan migration switch TER

How to migrate from regular plan to direct plan (cross-platform)

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Migrating from regular plan to direct plan mutual fund holdings is a common operation for self-directed Indian investors who initially started with a distributor-led regular plan and later realised the long-term TER-differential advantage of the direct plan. The migration involves redeeming or switching the regular plan units and acquiring direct plan units in the same scheme (or equivalent). Across the major platforms in India, the operational mechanics differ but the underlying economics are the same: the migration captures the lifetime TER-differential value but triggers capital-gains tax on the redemption leg.

The mathematical case for migration is documented in direct vs regular plan TER differential and direct mutual fund investing in India . For equity-oriented schemes, the typical TER-differential is 0.5-1.0 per cent annualised. Over a 20-year holding period, this compounds to roughly 11-16 per cent extra terminal value in the direct plan relative to the regular plan. The trade-off is the tax cost paid at migration time: the redemption leg triggers STCG or LTCG depending on holding period.

This article covers the migration end-to-end: the economic decision framework, the platform-specific operational mechanics (AMC-direct, MFU, CAMS Online, KFinKart, Zerodha Coin), the tax implications, the practical timing considerations, and the post-migration SIP and STP updates. The Coin-specific migration flow covers the Zerodha Coin route in dedicated detail.

Decision framework

The TER-differential value

The lifetime value of migrating depends on three factors:

  • Annual TER differential: typically 0.5-1.0 per cent for equity schemes, 0.1-0.4 per cent for debt schemes, smaller for index funds and ETFs.
  • Remaining expected holding period: longer holding periods amplify the TER advantage exponentially through compounding.
  • Current AUM in the regular plan: the differential is proportional to AUM.

A simple formula: Lifetime TER value ≈ AUM × TER differential × (1.5 + holding period). For Rs 10 lakh in equity regular plan with 0.75 per cent TER differential and 15-year remaining holding period, this gives approximately 10 × 0.0075 × 16.5 ≈ Rs 1.24 lakh of TER savings.

The tax cost

The redemption leg of migration triggers capital-gains tax. For equity-oriented schemes :

  • STCG (holding period up to 12 months): 20 per cent on the gain (post July 2024 Finance Act).
  • LTCG (holding period above 12 months): 12.5 per cent on the gain above Rs 1.25 lakh per financial year.

For debt-oriented schemes acquired post 1 April 2023 , all gains are taxed at slab rate as STCG regardless of holding period.

For debt schemes acquired before 1 April 2023, the pre-reform regime continues to apply.

The break-even

The migration is worthwhile if Lifetime TER value > Tax cost. For Rs 10 lakh equity regular plan with 5-year remaining holding period and recent NAV appreciation producing Rs 2 lakh LTCG:

  • Lifetime TER value ≈ 10 × 0.0075 × 6.5 ≈ Rs 49,000.
  • Tax cost ≈ (2,00,000 - 1,25,000) × 12.5 per cent ≈ Rs 9,375.

In this example, migration is comfortably positive. For very short remaining holding periods (e.g., 2-3 years) or very large unrealised gains, the migration may not be worth the tax cost.

Migration routes

Within-AMC switch (preferred)

The simplest migration is a within-AMC switch from the regular plan of a scheme to the direct plan of the same scheme. Almost every AMC supports this through:

The switch is processed as a single transaction: redemption of regular plan units plus subscription of direct plan units at the same day’s NAV. The two-leg transaction simplifies tax computation because both legs settle at the same NAV.

The Coin-specific switch and the broader direct-to-regular and regular-to-direct switch implications cover platform-specific nuances.

Cross-AMC redemption and repurchase

A cross-AMC migration involves:

  1. Redeem regular plan units at the source AMC.
  2. Wait for redemption proceeds (1-3 business days).
  3. Purchase direct plan units of an equivalent scheme at a different AMC.

This route is used when the investor is dissatisfied with the source AMC and wants to also change the AMC. The downside is a settlement gap during which the funds are not invested, exposing the investor to opportunity cost (market moves during the gap).

Special case: dematerialised mutual fund units

For units held in dematerialised form through Zerodha Coin , the migration logic is similar but the operational flow runs through the broker rather than the AMC portal. The Coin-specific guide details the demat-specific workflow.

Operational walkthrough by platform

AMC-direct portal

Most AMCs operate a portal at their own domain (e.g., hdfcmutualfund.com, sbimf.com, axismf.com). The plan-variant switch flow:

  1. Log in with the investor’s folio credentials.
  2. Navigate to the scheme in the existing portfolio.
  3. Click “Switch” or “Plan Switch”.
  4. Select the target plan variant (direct, with growth or IDCW sub-option).
  5. Enter the amount or units to switch.
  6. Confirm. The switch executes at the same day’s NAV (for orders received before the cut-off) or the next day’s NAV.

The switch creates a new folio (or new units in an existing direct-plan folio) at the AMC, with the regular plan units redeemed.

MFU eCAN

Through MFU Online with an eCAN :

  1. Log in to mfuonline.com.
  2. Navigate to “Switch” or “Plan Migration”.
  3. Select the source folio (regular plan) and target plan variant (direct).
  4. Confirm.

MFU routes the switch to the relevant AMC’s RTA for processing.

CAMS Online myCAMS

Through myCAMS :

  1. Log in to camsonline.com.
  2. Navigate to the source folio in the dashboard.
  3. Select “Switch” with target plan variant set to direct.
  4. Authorise.

The switch is processed through CAMS as RTA for the relevant AMC.

KFinKart

For KFin-RTA AMCs , the workflow at kfintech.com (or KFinKart) is functionally identical to myCAMS but limited to the AMCs KFin serves.

Broker platforms

Zerodha Coin , Groww , and similar platforms support plan-variant switch through their portfolio interface. The mechanics:

  1. Open the source scheme in the portfolio.
  2. Initiate a switch with target plan = direct.
  3. The broker routes the order to the AMC’s RTA.

For Zerodha Coin specifically, units are held in demat form, so the switch involves coordination with the depository for the unit replacement. See the Coin-specific guide .

Tax implications

Capital-gains computation

The redemption leg of the migration is taxed under the standard capital gains tax on equity in India framework:

  • Equity-oriented schemes (Section 111A and 112A): STCG 20 per cent if holding period up to 12 months; LTCG 12.5 per cent above Rs 1.25 lakh per FY if holding period above 12 months.
  • Debt-oriented schemes (post April 2023): slab rate STCG regardless of holding period.
  • Debt-oriented schemes (pre April 2023): LTCG 20 per cent with indexation if holding period above 36 months; STCG slab rate otherwise.

The full computation framework is documented in capital gains tax on equity in India and mutual fund taxation in India .

FIFO method

For SIP-accumulated portfolios, the redemption follows FIFO (First-In-First-Out) method. The oldest units are deemed redeemed first. This is important because:

  • The oldest units typically qualify for LTCG (lower rate).
  • For pre-31-January-2018 acquisitions, the grandfathering rule provides notional cost basis at the FMV on 31 January 2018.

Section 1.25 lakh LTCG exemption strategic use

The Rs 1.25 lakh annual LTCG exemption (post July 2024) provides a strategic timing opportunity:

  1. Migrate units producing up to Rs 1.25 lakh LTCG in one FY.
  2. Carry over the remaining regular plan units to the next FY.
  3. Continue migrating in tranches each FY, capturing the Rs 1.25 lakh exemption each year.

For a Rs 10 lakh portfolio with Rs 5 lakh of unrealised LTCG, migrating Rs 2.5 lakh of units producing Rs 1.25 lakh of LTCG each FY would eliminate tax cost across 4 years.

Holding period reset

Each direct plan unit acquired through the switch starts with a fresh acquisition date for capital-gains classification purposes. So a regular plan unit held for 5 years (LTCG-qualified) becomes a direct plan unit held from the switch date (initially STCG-classified). The reset is a consideration if the investor plans to redeem the direct plan units within 12 months.

Practical timing considerations

Early in the financial year

Migrating early in a financial year (April-June) maximises the Rs 1.25 lakh LTCG exemption opportunity for that FY because the full FY’s exemption is available.

Pre-31-January-2018 holdings

For units acquired before 31 January 2018, the grandfathering rule provides notional cost basis. These holdings often have substantial unrealised gains that would otherwise be heavily taxed; the grandfathered cost basis materially reduces the migration tax cost.

Market-timing considerations

The migration is generally agnostic to market levels because both the redemption and the purchase happen at the same NAV (for within-AMC switches). Market-timing should not influence the migration decision; the decision is driven by TER vs tax economics.

Active SIP and STP commitments

If active SIPs or STPs are feeding the regular plan, these need to be cancelled and re-registered to feed the direct plan after the migration. The re-registration may have a 7-10 business day lag with NACH mandates (UPI autopay activates faster).

Post-migration follow-up

SIP and STP redirection

Cancel any active SIPs or STPs feeding the regular plan and re-register them feeding the direct plan. The redirection ensures all future contributions accrue at the lower direct-plan TER.

Statement reconciliation

Verify the next Consolidated Account Statement (CAS) shows:

  • The redemption of regular plan units.
  • The acquisition of direct plan units at the same date and NAV.
  • The capital-gains tax data for tax-filing purposes.

Folio cleanup

After the migration, the old regular plan folio may continue to exist with zero units. Some investors close the folio entirely; others leave it open as a record. Closure is typically through a written request to the AMC.

When NOT to migrate

The migration is not always positive. Skip migration when:

  • Very short remaining holding period: If the investor plans to redeem within 12-24 months, the limited remaining TER benefit may not justify the tax cost.
  • Very large unrealised gains: Tax cost on the redemption leg may exceed lifetime TER value.
  • Investor satisfied with adviser relationship: If the investor values the distributor’s advisory services, the distributor commission embedded in the regular plan TER is the explicit cost of that advice. Migrating eliminates the commission and may break the adviser relationship.
  • Small AUM: For AUM below Rs 1-2 lakh, the absolute TER savings may not justify the migration overhead.

See also

External references

References

  1. SEBI circular CIR/IMD/DF/21/2012 dated 13 September 2012, mandating direct plans effective 1 January 2013.
  2. SEBI Master Circular on Mutual Funds, plan-variant switch provisions, sebi.gov.in.
  3. Income Tax Act, Sections 111A and 112A and Finance (No. 2) Act 2024 amendments.
  4. AMFI guidance on direct plan migration and TER differential disclosure.
  5. CAMS Online and KFin Technologies operational documentation on plan-variant switches.
  6. MFU operational documentation on cross-AMC transaction routing.

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