Knowing how to transfer mutual funds from one brokerage account to another is crucial if you want to make good returns on your investments, minimise fees, or gain level access. Understanding how to transfer mutual funds from one broker to another can make it a seamless process and align you with your investment strategy. However, when should you opt for the transfer?
This article will walk you through every step of the process, from selecting a new broker to transferring your mutual funds, and explain how to implement this in practice.
Can mutual funds be transferred?
Mutual funds can be transferred between accounts or individuals, but the process varies based on the type of account or ownership. Transfers can occur due to demat account changes, inheritance, or gifting. For instance, mutual funds held in dematerialised form can be transferred electronically between demat accounts. However, ownership transfers for non-demat accounts require submission of specific forms to the asset management company (AMC). It is essential to verify whether the fund allows transferability, as some schemes may restrict it. Additionally, tax implications may arise, particularly if the transfer is treated as a sale or gift.
How to efficiently transfer mutual funds to another brokerage?
Before knowing the steps involved, you must understand when to transfer mutual funds from one brokerage to another. This should be done when there is a change in your financial objectives, your existing mutual fund underperforms, or if you wish to choose a different asset category.
Let us look at a step-by-step guide to transferring mutual funds to another brokerage account without any hassles.
1. Research and choose a new broker
Your first move here would be to start hunting for a new broker that will provide you with the investment options necessary to accomplish all your financial goals. Consider factors like brokerage fees, availability of mutual funds, quality of customer service, and tools like investment education. Ensure the new broker has a substantial reputation to offer and can comply with your long-term investment strategy.
2. Open an account with the new broker
After you have selected a new broker, the next step is to open a new account. This involves filling out the application, submitting documents, and agreeing to the broker’s terms. Check properly whether all your personal information is accurate because a mistake can cause problems during the transfer.
3. Review and update your investment strategy
Review and update your investment strategy as you initiate the transfer, and if needed, change your investment plan. Review your current mutual fund holdings to ensure they align with where you need them to be and the level of risk appetite. This is also the ideal time to consider whether there are any mutual funds or other investment products that would be more appropriate for your strategy with the new broker.
4. Initiate the transfer process
You must inform your current broker that you are moving your mutual funds to another broker. Typically, you must fill out a transfer request form, which can be done online or on paper. Be sure to indicate the particulars of the mutual funds you request for transfer.
5. Complete the transfer paperwork
After initiating an account transfer, you must complete the necessary paperwork. You will need to provide your new broker with details, like the account number and any special instructions about making the transfer. Make sure that all forms are filled out properly to avoid any delays. Your old and new brokers might need signed authorisation documents to move your transfer along.
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6. Monitor the transfer progress
You need to track the movement of mutual funds as soon as they go through the transfer process. Contact your existing and new brokers to ensure nothing goes wrong at the last minute. Many brokers offer online transfer tracking so you can follow their movements and know where your request stands at all times. Knowing the transfer duration of mutual funds can keep you at ease in terms of your expectations and investment plans during that period.
7. Confirm the transfer completion
Upon successful transfer, you will receive a confirmation from your new broker. Check whether all your mutual funds have been properly transferred without any discrepancies. You must also compare the transferred amounts with what is in your records to ensure everything has been safely transferred and nothing is missing.
8. Review and update your investment portfolio
Following the transfer, consider a detailed analysis and review of your investment portfolio. Ensure that your new broker receives the right information on all mutual fund schemes and that they appear properly in your account. This is also the best time to evaluate your portfolio's performance and make any necessary changes to align with your goals.
How to transfer mutual funds from one demat to another?
Transferring mutual funds from one demat account to another involves the following steps:
- Verify account compatibility:
Ensure that both demat accounts are compatible with the mutual fund holdings and belong to the same depository, such as NSDL or CDSL. - Submit DIS (Delivery Instruction Slip):
Obtain a Delivery Instruction Slip (DIS) from your current demat account provider. Fill in details like the ISIN of the mutual fund, target demat account number, and the depository name. - Specify transfer type:
Choose “off-market transfer” for non-trading transactions and specify the reason, such as account consolidation. - Authorise the transfer:
Submit the completed DIS to the existing demat account provider. Ensure signatures match the records. - Pay applicable charges:
A nominal transfer fee may apply. The charges vary based on the depository and brokerage. - Verify transfer status:
Once the request is processed, check your target demat account to confirm receipt of the mutual fund units. - Update contact details:
Inform the AMC about changes to ensure seamless communication for account statements and dividends.
This method ensures a smooth transition, but ensure no lien is marked on your holdings before initiating the transfer.
Steps for the transfer of mutual funds in case of death.
Transferring mutual funds after the account holder’s death requires the following steps:
- Notify the AMC:
Inform the Asset Management Company (AMC) or registrar (e.g., CAMS or KFintech) about the account holder’s demise. - Provide proof of death:
Submit the death certificate in original or a notarised copy. - Submit the nominee’s details:
If a nominee exists, they must submit a claim form, their identity proof (Aadhaar, PAN), and bank details. - In absence of a nominee:
Legal heirs must provide additional documents, including a will or succession certificate, probate (if applicable), and a letter of indemnity. - Transfer process completion:
The AMC processes the claim and transfers the mutual fund units to the nominee’s or legal heir’s account after verifying documents. - Update account details:
The new holder should update the KYC details with the AMC to ensure smooth operation of the account.
This process ensures the rightful transfer of mutual funds, reducing disputes among legal heirs.
How to transfer mutual fund amount to bank account?
To transfer a mutual fund amount to a bank account:
- Initiate redemption:
Log in to your mutual fund account via the AMC portal or registrar. Select the fund and initiate redemption. - Provide bank details:
Ensure the registered bank account details are accurate for receiving the redeemed amount. - Wait for settlement:
Funds are credited as per the redemption timeline, generally 1–3 working days, based on the mutual fund type. - Verify credit:
Check your bank account to confirm the credited amount.
This process allows direct transfer of funds without additional paperwork.
Benefits of transfer of mutual funds
Transferring mutual funds provides several advantages:
- Simplified management:
Consolidating holdings in one demat account makes monitoring and managing investments easier. - Seamless ownership transfer:
Transfers facilitate inheritance, gifting, or account changes without liquidating investments. - Cost efficiency:
Transfers avoid exit loads or taxation linked to redemption, preserving investment value. - Convenience:
Dematerialised units enable easy electronic transfers, ensuring flexibility across accounts.
These benefits enhance the investment experience, particularly during life events like account changes or inheritance.
What will be the mutual funds transfer fees and taxes?
Mutual fund transfer fees and taxes depend on the transfer type:
- Fees:
Demat transfers typically involve nominal charges ranging from Rs. 25 to Rs. 100 per transaction. Physical mutual fund transfers may require processing fees by the AMC. - Taxes:
Transferring via redemption triggers capital gains tax based on the holding period. Gifted mutual funds are tax-exempt for the receiver but attract tax if sold later.
Understanding these costs ensures informed decision-making during transfers.
What are the documents for the transfer of mutual funds?
Documents required for transferring mutual funds include:
- Demat transfers:
- Delivery Instruction Slip (DIS)
- Target demat account details
- Inheritance or death transfer:
- Death certificate
- Nominee or heir’s KYC documents
- Succession certificate or will (if no nominee)
- Gifting or other transfers:
- Gift deed
- Transferor and transferee’s KYC
These documents ensure a smooth transfer process with minimal discrepancies.
When should you consider the mutual fund transfer?
Several scenarios may arise when you might want to consider moving your mutual funds to another broker. Switching to a new broker with better rates and superior customer service may be the best solution if you are unsatisfied with your current broker’s services or fees. If your investment profile demands have also changed, and you need to expand your mutual fund investments, a transfer may be necessary.
Considerations before transferring mutual funds
When transferring mutual funds, consider the following:
- Eligibility:
Verify whether the mutual fund scheme allows transfers, as some schemes restrict them. - Transfer method:
For demat transfers, ensure both accounts are compatible with the depository. Non-demat transfers require AMC-specific procedures. - Cost implications:
Factor in transfer fees and potential tax liabilities, especially if redemption occurs. - Nominee or heir details:
Update nominee details to simplify inheritance. Ensure legal documents are prepared if no nominee exists. - Fund performance:
Assess the performance of transferred units and ensure they align with your investment goals.
Considering these factors ensures a seamless and beneficial transfer process.
Conclusion
When transferring your mutual funds from one broker to another, you need a planned and executable strategy. These actions will facilitate a seamless transition that is in accordance with your investment goals and objectives. By following the steps mentioned in this article, you can get answers to the questions, “How to transfer mutual funds from one broker to another?” and “How to change one mutual fund to another?”
