Ch.8 · Capital Gains Tax on Mutual Funds · medium
What is the tax implication of 'switching from regular to direct plan' of the same scheme?
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EXPLANATION
Despite being the same underlying portfolio, switching from Regular to Direct Plan is legally treated as: (1) Redemption from Regular Plan — triggering STCG (at 15%) or LTCG (at 12.5%) based on holding period; and (2) Fresh purchase of Direct Plan units — a new holding period starts from the switch date. The tax cost must be weighed against the long-term TER saving benefit of the Direct Plan to determine if switching is worthwhile.
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