How to switch from regular to direct mutual fund via Coin

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Switching from a regular plan to a direct plan of the same mutual fund scheme is one of the highest-impact, zero-cost investment improvements available to retail mutual fund investors in India. A regular plan includes a distributor trail commission (typically 0.5%–1.0% per annum for equity funds) embedded in its Total Expense Ratio (TER). A direct plan of the same scheme, available on Zerodha Coin, does not include this commission, resulting in a lower TER and consequently higher NAV growth over time.

This guide explains how to execute the switch from regular to direct plan via Coin, the prerequisite steps for units held in statement-of-account (SOA) folios, and the unavoidable tax consequences.

Prerequisites

  • An active Zerodha trading and demat account with complete KYC.
  • Regular plan mutual fund units – either already transferred to your Coin demat account, or held in SOA folios with the AMC.
  • CDSL TPIN set and accessible, or CDSL-registered mobile for OTP (for demat-held units).
  • TOTP authenticator for Zerodha two-factor login.
  • Understanding of the capital gains tax that will be triggered by the switch.

Why switch to direct plans

SEBI’s circular SEBI/IMD/DF/21/2012 (effective 1 January 2013) mandated that all mutual fund schemes offer a direct plan. The direct plan of a scheme is identical in portfolio composition and fund manager to the regular plan; the only difference is the absence of distributor commission in the TER.

For a typical actively managed equity fund:

  • Regular plan TER: 1.5%–2.0% per annum
  • Direct plan TER: 0.7%–1.0% per annum
  • Difference: 0.5%–1.0% per annum

On a Rs 10 lakh corpus growing at 12% per annum over 20 years, a 1% per annum TER difference compounds to a difference of approximately Rs 8–10 lakh in final corpus. Coin facilitates free-of-charge direct plan investing; there is no platform fee charged by Coin for direct plan mutual funds.

Understanding the regular-to-direct switch: what it is and is not

A switch from a regular plan to the direct plan of the same scheme is treated, under the SEBI (Mutual Funds) Regulations, 1996 and the Income Tax Act, 1961, as:

  1. A redemption from the regular plan (triggering capital gains tax), and
  2. A fresh purchase in the direct plan (starting a new holding period).

This means the switch resets the holding period for capital gains purposes. If you have held regular plan units for many years, switching out will crystallise capital gains at current NAV, and the holding period on the new direct plan units starts from the switch date.

Tax cost of switching

Before executing the switch, calculate the capital gains tax cost:

  • Equity funds (held 12+ months): LTCG at 12.5% on gains above Rs 1.25 lakh per year (Finance Act 2024, effective 23 July 2024). If the switch happens to fall within the Rs 1.25 lakh annual exemption, the tax cost is zero.
  • Equity funds (held less than 12 months): STCG at 20%.
  • Debt funds (purchased from 1 April 2023): Gains taxed at slab rates as STCG regardless of holding period (Finance Act 2023).

For equity fund investors with significant long-term holdings and large unrealised gains, it may be financially rational to switch gradually – redeeming and reinvesting in direct plan in tranches across multiple financial years to stay within the Rs 1.25 lakh LTCG annual exemption each year.

See capital gains tax in India and the grandfathering rule for LTCG for further details.

Step-by-step procedure

Step 1: Identify and list all regular plan holdings

Obtain your Consolidated Account Statement (CAS) from CAMS (camsonline.com) or KFintech (kfintech.com) using your PAN and email address. The CAS lists all mutual fund folios, AMC names, scheme names (indicating “Regular Plan” or “Direct Plan”), and unit balances.

Identify every scheme where you hold regular plan units that you wish to migrate to direct plan on Coin.

Step 2: Check whether units are in demat or SOA folio

  • Demat-held units (in your Coin CDSL account): These were purchased through Coin or imported to demat. The switch can be done directly within the Coin interface.
  • SOA-folio units (with AMC/registrar): Units held in statement-of-account form (purchased through a distributor or directly with the AMC’s website in physical folio). These cannot be switched through Coin’s interface directly without first being brought into the demat account or handled through an offline switch request with the AMC.

For SOA-folio regular plan units, you can submit a switch request directly to the AMC (in person at an AMC branch, through the AMC’s investor portal using your folio details and PAN, or through BSE StAR MF’s online portal). The switch converts the units from regular plan to direct plan within the same AMC and credits the direct plan units to a new or existing folio.

Alternatively, see How to import existing mutual funds into Coin to consolidate your SOA folios into demat first.

Step 3: Assess exit loads on the regular plan

Regular plan units are subject to the same exit load schedule as direct plan units for that scheme. If you are within the exit load period (commonly 1% within 12 months for equity funds), the exit load reduces your effective switch proceeds.

Step 4: Log in to Coin

Navigate to coin.zerodha.com or open the Coin mobile app. Enter your Zerodha client ID, password, and TOTP.

Step 5: Locate the regular plan in Holdings

Go to Portfolio > Holdings. If the regular plan units have been imported to your demat account, they appear here. Click the regular plan scheme name to open its detail page.

Note: Coin’s holdings will show the scheme name including the plan type in parentheses, for example “HDFC Flexi Cap Fund - Regular Plan” vs “HDFC Flexi Cap Fund - Direct Plan”.

Step 6: Initiate the switch

On the regular plan fund detail page, click Switch. The switch configuration drawer opens.

Select the amount or units to switch. Choose the destination scheme by searching for the same fund name but selecting the Direct Plan variant. Confirm the destination scheme shows “Direct Plan” in its full name before proceeding.

Step 7: Authorise via CDSL TPIN or OTP

For demat-held units, the CDSL authorisation step is required to debit the regular plan units from your demat account:

  • Enter your CDSL TPIN, or
  • Request and enter the CDSL OTP sent to your registered mobile.

Step 8: Review and confirm

Review the switch summary:

  • Source: Regular plan scheme, units/amount, exit load if applicable
  • Destination: Direct plan of the same scheme
  • Approximate switch-out and switch-in NAVs
  • Estimated settlement date

Click Confirm. Coin submits the switch order.

Step 9: Verify direct plan units

After T+1 to T+2 business days, the regular plan units are debited and direct plan units appear in Portfolio > Holdings in Coin. The new direct plan units carry a fresh purchase date (the switch date) for holding-period purposes.

Setting up a direct plan SIP going forward

After switching the lump-sum corpus to direct plan, ensure any running SIP on the regular plan is cancelled and a new SIP is set up on the direct plan. See How to start an SIP on Coin for the SIP setup procedure, and How to pause or cancel an SIP on Coin for stopping the regular plan SIP.

What can go wrong

Same-AMC restriction: Coin supports only intra-AMC switches. You cannot switch from HDFC’s regular plan directly into Mirae’s direct plan on Coin; you would need to redeem from HDFC and purchase separately in Mirae.

ELSS lock-in: Regular plan ELSS units cannot be switched before the 3-year lock-in from each instalment’s purchase date.

SOA folio units not reflected in Coin: If your regular plan units are in SOA folios (not demat), they will not appear in Coin’s Holdings. Use the offline AMC switch process or import them to demat first.

Reset of holding period: The switch resets the LTCG holding period. If you switch equity fund units that were one day away from the 12-month LTCG threshold, the new direct plan units start a fresh 12-month clock.

References

  1. SEBI (Mutual Funds) Regulations, 1996, as amended.
  2. SEBI Circular SEBI/IMD/DF/21/2012 dated 13 September 2012 – Introduction of Direct Plan for Mutual Fund Schemes.
  3. AMFI Circular No. 135/BP/75/2012-13 on direct plan implementation.
  4. Finance Act 2023 – Debt mutual fund taxation amendment (Section 50AA).
  5. Finance Act 2024 – Revised LTCG/STCG rates, effective 23 July 2024.
  6. Income Tax Act, 1961, Sections 111A and 112A.
  7. Zerodha Coin support documentation (support.zerodha.com).
  8. CAMS Investor Services Portal (camsonline.com).

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

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