This makes investing in mutual funds a convenient method that will also help you increase your riches. However, with time the individual’s financial situation changes and it is normal to sometimes change some account information such as the bank account that is associated with the mutual fund. This is especially required when using the redemption money in which the money is electronically transferred to the bank account. You should review your bank information in your account if you have switched banks or need to change your bank details or change your bank information before submitting a redemption request so that future transactions will be smooth.
In this article, we’ll cover:
- How to Switch Your Bank Account for Mutual Fund Redemption
- Mutual Fund Redemption Tax
- This paper focuses on the process of redemption of mutual funds.
- Mutual Fund Redemption Online
Multiply the redemption charges of that specific mutual fund by the number of fund sold to arrive at the redemption charges figure.
1. How to Switch Your Bank Account For Fund Redemption?
It is crucial if you wanted to update your bank account details as this would help in easy and swift collection of redemption proceeds. Here’s a step-by-step guide on how to update your bank account information:
a) By the Asset Management Company (AMC)
Fill Out a Change Request Form: Every mutual fund company offers a specific form commonly known as the Bank Account Change Request Form, which can be obtained on the mutual fund company’s website or at the company’s office. In particular, it is possible to download the form and indicate all the necessary information there.
Submit Required Documents: If you wish to change your bank details you will be required to fill in the following:
A photocopy of another cheque from the new bank or any cheque you have in your name (to verify).
Cancelled cheque of your old bank (though not compulsory but some of the AMCs may insist for this.)
Letter of recommendation of the new bank from that branch, attested pasbook or self attested new bank’s account statement.
Submit the Form: You fill this form and then either drop it at the AMC’s branch physically or send it by post should there be specific AMC guidelines for submission.
Wait for Confirmation: The AMC usually takes 7-10 working days for processing. When it is done they will let you know through the email or the Short Messaging Service or SMS.
b) Through Registrar & Transfer Agents (RTA’s)
In case you have invested your money in several AMCs, the correct way to submit your new bank details is by using an RTA such as CAMS or KFintech.
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Log in to the RTA Portal: Many RTAs provide Internet sites through which you can consolidate all your mutual fund accounts.
Request for Bank Change: They have provided a way that you can place a request through the internet by submitting what they require as identification besides following their methods in the link: They also invite you to visit their branch.
Submit Proof: It is also necessary to attach the copy of the cancelled cheque or bank statement regarding the new bank in the case with AMC requirements.
Confirmation: The RTA will modify your bank account on all the mutual funds serviced by them and then inform you when the process is done.
c) By contacting your Financial Advisor or Distributor
Financial advisor or third-party distributor is very helpful in this process for you. Make sure you make them avail all the documents needed when changing the bank account.
2. Mutual Fund Redemption Tax
Redemption of mutual funds may be tax effective or otherwise depending on type of fund and holding period.
a) Equity Mutual Funds
Short-Term Capital Gains (STCG): If equity mutual funds are sold after having been held for 1 year or more, they trigger long-term capital gains taxes upon redemption, but any redemption made within a year attracts a 15% short-term capital gain tax.
Long-Term Capital Gains (LTCG): The gains under sections 54 and 54EC where the asset is held longer than one year are earned up to ₹ 1 lac per annum tax free. Where the gains amount to ₹1 lakh or more, the taxes levied are at the rate of 10% without indexing.
For more information visit here – How Do I Complain About a Wrong UPI Transaction?
b) Debt Mutual Funds
Short-Term Capital Gains: If the debt mutual funds have been held for less than three years they are included as the income of the particular fiscal year and the income tax is levied according to the respective income tax band.
Long-Term Capital Gains: If these are kept for over 3 years, then there is a tax at 20% after the benefits of indexation.
c) Tax Deducted at Source (TDS)
Residents, you don’t pay TDS on mutual fund redemption where TDS is basically not collected from residents. However, in case of NRIs TDS is to be deducted under the income tax act depending on the type of mutual fund and holding period of the investment.
3. Redemption Process of Mutual fund
Redemption of the shares in a mutual fund operation is quite easy, equally enabling an investor to sell part or the entire shares. Here’s how it works:
Choose the Fund to Redeem: Choose the mutual fund scheme from which you want to redeem units of the particular scheme.
Place a Redemption Request: It can be made through your AMC, RTA or directly through the internet by visiting a mutual fund website or application or through your distributor.
Processing Time: In the case of equity mutual funds, the amount is credited in T+2 working days and in the case of debt funds, the amount is credited within T+ 1 working day.
Receive Proceeds: After that, the redemption amount received as proceedings goes back straight to your account if you have registered one.
Read more – How to Open a Demat Account for an Illiterate Person: A Step-by-Step Guide
To sum up, for the redemption of mutual funds is not a difficult process, Understanding the status of the bank and submitted details is very important. By recognizing the tax consequences and costs for redemptions, it comes in handy to make a correct decision regarding the investments and to optimize the process.
