Inter-AMC migration of mutual fund investments

Inter-AMC migration (sometimes called an inter-AMC switch) is the process of moving a mutual fund investment from a scheme managed by one AMC to a scheme managed by a different AMC. Unlike an inter-scheme switch within the same AMC, there is no direct transfer mechanism between two separate AMCs in India; the process involves a full redemption from the source AMC followed by a fresh subscription to the destination AMC, with the investor’s bank account as an intermediary.

Why there is no “true” inter-AMC switch

Each AMC operates an independent scheme universe with its own RTA (though most AMCs use CAMS or KFintech as their RTA, the individual scheme records are maintained separately for each AMC). There is no industry-wide mechanism that allows a unit holding in AMC A to be directly transferred to AMC B without redemption and re-subscription.

Therefore, inter-AMC migration is operationally two separate transactions:

1. Redemption from AMC A: The investor submits a redemption request for the source scheme. AMC A processes the redemption at the applicable NAV, deducts exit load (if any), and credits net proceeds to the investor’s registered bank account within the applicable settlement timeline (T+1 to T+3 depending on scheme type).

2. Fresh subscription to AMC B: Once the redemption proceeds are credited to the bank, the investor submits a fresh purchase request to AMC B’s scheme. The applicable NAV for the new purchase is determined by the cut-off time on the day the funds are received and the subscription is processed.

Settlement gap risk

The settlement gap is the period between the redemption from AMC A and the subscription to AMC B:

• For equity funds at AMC A, the redemption proceeds arrive in the bank in T+2 or T+3 business days.
• The investor must then initiate the subscription to AMC B, which will also take time to confirm.
• During the gap, the investor’s funds are not invested in any market instrument and earn no return.
• If markets rise during the settlement gap, the investor effectively misses the upside on the transferred corpus.

Tax implications

The redemption from AMC A is a taxable event regardless of the investor’s intent to reinvest the proceeds:

• Capital gains tax applies based on the holding period and scheme type at AMC A.
• The cost of acquisition at AMC B is the subscription NAV paid at the destination scheme, with a fresh holding period starting from the subscription date.

This is identical in tax treatment to any other redemption, there is no rollover or deferral of capital gains for inter-AMC migrations. The investor must account for capital gains tax in the year of redemption from AMC A.

When inter-AMC migration is justified

Given the settlement gap, tax cost, and administrative friction, inter-AMC migration is typically considered when:

1. The destination scheme offers materially better expected performance or lower TER that is expected to compensate for the one-time tax and transition cost.
2. The investor’s overall portfolio reallocation requires moving to a scheme category not available at the current AMC.
3. Consolidation of fund houses for operational simplicity.
4. The holding period at AMC A is sufficiently long that the capital gains tax cost is manageable (e.g., only Rs 1.25 lakh exempt under LTCG rules for equity).

Comparison with intra-AMC switch

Related articles

• Switch in mutual funds (overview)
• Inter-scheme switch
• Applicable NAV
• Mutual fund settlement cycles
• Capital gains tax in India
• Total Expense Ratio

References

1. SEBI (Mutual Funds) Regulations, 1996.
2. SEBI Master Circular for Mutual Funds (2024).
3. Income Tax Act, 1961, capital gains on redemption.