How to switch from regular to direct mutual funds
Learn how to switch regular mutual funds to direct plans in a few steps — and stop losing 0.5–1% of returns annually to distributor commissions.
If you’ve been investing in mutual funds through a bank relationship manager, an insurance agent, or an app that “helps you invest for free,” there’s a good chance you’re holding regular funds. Not a disaster. But quietly, every single year, a chunk of your returns is going to someone else as commission — and you’re not even seeing it happen.
Switching to direct funds is one of those rare personal finance moves where the action is simple and the payoff compounds over years. Here’s exactly how to do it.
What’s Actually Different Between Regular and Direct
Every mutual fund scheme comes in two versions: regular and direct. The underlying portfolio is identical — same fund manager, same stocks or bonds. The only difference is cost.
Regular funds carry a higher expense ratio — that’s the annual fee the fund charges you, expressed as a percentage of your investment. Part of that extra fee goes to whoever sold you the fund: a broker, a distributor, your bank. Direct funds cut out that middleman, so the fee is lower and more of your money stays invested.
The gap sounds small. On a large-cap fund, the regular plan might have an expense ratio of 1.5% while the direct plan is at 0.7%. That’s 0.8% a year. So what?
Here’s the “so what.” Say you’re a 28-year-old software engineer in Pune, putting ₹10,000 a month into an equity mutual fund. Over 25 years, assuming 12% CAGR (that means your money grows at 12% per year on average, compounded), the regular plan gets you to roughly ₹1.89 crore. The direct plan, with that 0.8% saved, gets you to roughly ₹2.17 crore. That’s ₹28 lakh extra — just from switching plans. No additional investment. No change in the fund.
What Switching Actually Means (and the Tax Part You Can’t Ignore)
Switching from regular to direct is treated as a redemption and fresh purchase in the eyes of the tax authorities. You’re selling your regular plan units and buying direct plan units. This means capital gains tax applies.
If your equity fund units are less than a year old, you’ll pay 15% Short-Term Capital Gains (STCG) tax on the profit. If they’re more than a year old, you get the Long-Term Capital Gains (LTCG) rate of 10% on gains above ₹1 lakh per year.
So if you’ve been investing ₹8,000 a month in an HDFC Flexi Cap Fund regular plan for 3 years and your current value is ₹3.5 lakh against a cost of ₹2.88 lakh, your gain is roughly ₹62,000. Since it’s under ₹1 lakh and you’ve held it over a year, you owe zero tax on this switch. Timing your switch smartly — staying under the ₹1 lakh LTCG exemption — can mean you pay nothing at all.
For larger portfolios, switch in tranches across two financial years to keep each year’s gains under ₹1 lakh.
Where to Actually Do the Switch
The cleanest way is through Kuvera or Coin by Zerodha — both are direct-plan-only platforms. You create an account, complete your KYC (which links your PAN and bank account), and submit a switch request. For most AMCs — Axis, Mirae, SBI, HDFC — the switch processes within 2–3 business days.
If you prefer going directly, every AMC (Asset Management Company — the organisation that runs the fund, like SBI Mutual Fund or Mirae Asset) has its own website where you can switch online. Log in with your folio number, go to the “Switch” section, and move units from the regular plan to the direct plan of the same scheme.
MF Central (mfcentral.com), the SEBI-backed platform, also lets you manage and switch funds across all AMCs from one place. It’s free and doesn’t push any products.
Don’t switch through your bank’s app or a distributor’s platform. They only show regular plans — that’s where their commission comes from.
Once you’ve switched, set up your SIPs fresh on the direct plan. Future investments will automatically go into the right plan.
Frequently Asked Questions
Will I lose money when I switch from regular to direct?
No, you won’t lose the underlying value of your investment. What happens is your regular plan units are sold at current NAV and direct plan units are purchased — you just need to account for any capital gains tax on the profit at the time of switching.
Can I switch only part of my investment, not all of it?
Yes, you can do a partial switch by specifying either the number of units or a rupee amount. This is useful if your total gains are close to ₹1 lakh and you want to stay within the tax-free LTCG threshold.
Is there an exit load when switching from regular to direct?
Most equity funds charge an exit load of 1% if you redeem within one year of purchase. Since a switch counts as redemption, check your fund’s exit load terms before switching. If your units are over a year old, most funds charge zero exit load.
Do I need to redo my KYC to invest in direct funds?
No. Your existing KYC is valid across all platforms. If you’re already KYC-compliant through your bank or any SEBI-registered intermediary, you can use the same details on Kuvera, Coin, or MF Central without redoing anything.
What happens to my SIP if I switch to direct?
Your existing SIP on the regular plan continues until you cancel it. You need to manually stop the old SIP and start a new one on the direct plan — on whichever platform you’re using. Don’t forget this step, or you’ll keep buying into the regular plan even after switching.