InvestorQ : What is the position of my income tax liability,if i switch my regular mutual fund units to direct m.f. units,of the same scheme ?
Deepak Agwan made post

What is the position of my income tax liability,if i switch my regular mutual fund units to direct m.f. units,of the same scheme ?

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Rutuja Nigam answered.
2 years ago
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The Securities and Exchange Board of India (SEBI) introduced direct mutual fund plans in January 2013, making it mandatory for all Asset Management Companies (AMCs). In direct mutual funds, an investor can invest in mutual fund schemes directly, without the involvement of an agent, broker or distributor. 

Regular funds are those funds that are bought through a mutual fund broker, distributor, or advisor. For every regular fund, Asset Management Companies (AMCs) pays commission to the agent for introducing a new investor to their plan. This commission is then recovered as an expense from the investors, and hence, regular funds are slightly more expensive than direct funds.

Direct funds and regular funds are just the two options to buy the same mutual fund scheme which is run by the same fund managers who invest in the same stocks and bonds.
Directs mutual funds are better options as compared to regular mutual funds.

Switching from regular funds to direct fund means selling your current units of regular fund and purchase of units of the direct fund. Exit load as per the conditions of the fund shall be charged at the time of switching. 
Any income arising at the time of switching between funds will be taxable as per the income tax rules. If the fund is equity fund and the switching is done within 12 months of purchase then it will be taxed as short term capital gains otherwise long term capital gains.

Short-term Capital (from equity) is taxed at the rate of 15%, while short term capital gains arising on debt funds are taxed as per income tax slab of the investor. Long term gains, however, are taxable at the rate of 20% (with indexation) and at the rate of 10% (without indexation).
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