The talk about direct plans
could. He can give a request for the conversion to direct plan.
However, the terms and conditions that prevailed at the time of original registration will continue for the future SIP instalments.
Rohit paused. It looked like he had got all his answers. It was a breather for me.
“Our conversation on this is not over till you tell me if the value of my investments will attract capital gains if I go for redemption or switch out,” he started. “But if I am going for conversion from regular plan to direct plan, will my conversion be treated on par with redemption and switch out and capital gains be charged at the time of conversion?”
Now, I was clean bowled. So I connected him with our CFO, Mr. Balwant Jain who was kind enough to address this issue even on a Saturday evening.
According to Mr. Jain, it will entail tax consequences. He added, “As per the provisions of income tax act tax is payable on profit made on transfer of any capital asset. As per the definition, any exchange is also treated as transfer so the exchange of regular plan with any direct plan will amount to transfer and thus depending on cost and holding period, you will have to pay short-term capital gain @15.45 per cent on the difference between your cost and the value realised on such shifting, if the holding period is less than 12 months. If the holding period is more, the appreciation in your
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