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The concept and Tax effect of Switching in Mutual Funds

The concept and Tax effect of Switching in Mutual Funds Investing in Mutual Funds and their respective Tax effects
What is Switching? It is withdrawal of money from one scheme of Mutual Fund and investing in the other scheme of Mutual Fund without actually bringing withdrawal money to the Bank. Switching can ONLY be done among various schemes of a Mutual Fund Company, thus, only intra-Switching can be done in Mutual Funds. Example: If one has invested in some scheme of Reliance Mutual Fund then Switching of that amount can only be done among other schemes of Reliance Mutual Fund and NOT from one scheme of Reliance Mutual Fund to a Scheme of HDFC Mutual Fund.
As Switch Out is treated as redemption of Mutual fund and a switch in is treated as fresh investment in the Mutual Fund scheme.
Benefits of Switching: 1.You just need to submit a duly filled and signed Transaction form for the same. 2.No need to wait for Money to get credited to your Bank account because, in Switching, money is tra…