Switch Regular to Direct Mutual Funds On INDmoney
Switch eligible regular mutual fund plans to direct plans and reduce the distributor commission built into the expense ratio. Track your regular funds, compare the cost difference, check tax and exit-load impact, and switch to direct plans on INDmoney.
What Does Switching Regular to Direct Mutual Funds Mean?
A mutual fund scheme usually has two plan types: Regular Plan and Direct Plan. Both plans generally invest in the same stocks or bonds and are managed by the same fund manager. The main difference is the cost structure.
In a Regular Plan, you invest through a distributor, broker or bank. The distributor commission is built into the fund’s expense ratio. In a Direct Plan, you invest without that distributor layer, so the expense ratio is usually lower.
Switching regular to direct means moving your investment from the regular plan of a mutual fund scheme to the direct plan of the same scheme. You are not changing the fund strategy. You are mainly moving to the lower-cost version of the same fund.
How To Switch Regular To Direct Mutual Funds On INDmoney
Track Mutual Fund Portfolio
Track your entire mutual fund portfolio on INDmoney to identify which holdings are regular plans.
Select Fund To Switch
Choose the regular mutual fund you want to switch to, then click 'Switch to 0% commission funds'.
Review & Confirm Switch
Confirm the switch to the direct plan. After completion, track the direct plan along with your full portfolio on INDmoney.
Why Switch Regular Mutual Funds To Direct Plans On INDmoney
Lower Expense Ratio
Direct plans usually have a lower expense ratio because distributor commission is not built into the plan. This means a smaller part of the fund’s return is deducted as cost.
For example, if a regular plan has a 1.75% expense ratio and the direct plan has a 0.75% expense ratio, the cost difference is 1% every year.
More Returns Stay Invested
When costs are lower, more of the fund’s return stays with you. This difference may look small in one year, but it can become meaningful over long periods.
For example, on a ₹5 lakh investment, a 1% annual cost difference is roughly ₹5,000 in the first year. If that saving stays invested every year, it can compound along with the portfolio.
Lower Cost Structure
In most cases, the regular and direct plans belong to the same mutual fund scheme. The fund manager, investment strategy and underlying portfolio are generally the same.
So, if you are happy with the scheme but not the cost, switching to direct lets you continue with the same fund at a lower expense ratio.
Better for Long-Term Holding
The longer you stay invested, the more the cost difference can matter. Direct plans are especially useful when the fund is linked to a long-term goal such as retirement, child education or wealth creation.
If you plan to hold a fund for 7–10 years, even a small annual cost saving can create a visible difference in final value.
Reduces Hidden Cost Drag
Regular plan costs are not paid separately from your bank account. They are deducted inside the fund, so many investors do not notice them.
This is why regular plans can feel similar to direct plans on the surface, even though the cost difference may slowly reduce your final returns.
Regular Vs Direct Mutual Funds
| Difference | Regular Plan | Direct Plan |
|---|---|---|
| How you invest | Through distributor, broker, bank or intermediary | Directly with AMC or direct mutual fund platform |
| Expense ratio | Usually higher | Usually lower |
| Distributor commission | Included in fund expenses | Not included |
| Portfolio | Usually same as direct plan | Usually same as regular plan |
| Fund manager | Usually same as direct plan | Usually same as regular plan |
| NAV | Different from direct plan | Different from regular plan |
| Long-term impact | Higher cost may reduce final value | Lower cost may improve final value |
How Regular Mutual Fund Plan Can Reduce Returns?
Suppose you invested ₹5 lakh in a regular mutual fund plan.
Now assume the regular plan has an expense ratio that is 1% higher than the direct plan of the same scheme. This means approximately ₹5,000 extra cost in the first year on a ₹5 lakh portfolio.
The bigger impact comes over time.
If the direct plan effectively compounds at 12% per year and the regular plan compounds at 11% per year because of the extra cost difference, then after 10 years:
Direct Plan Value: ₹5,00,000 × 1.12¹⁰ = around ₹15.53 lakh
Regular Plan Value: ₹5,00,000 × 1.11¹⁰ = around ₹14.20 lakh
The difference is around ₹1.33 lakh over 10 years.
This is why switching from regular to direct can matter for long-term investors. The benefit is not just one year’s saving. The real benefit is that the saved cost also remains invested and compounds.
What Should You Check Before Switching From Regular To Direct Mutual Funds
Exit Load
Some funds charge an exit load if units are switched before a specific period. If the load is high and you plan to switch immediately, it may reduce the benefit of moving to direct.
Tax Impact
Switching is treated like a redemption from one plan and investment into another. If your investment has gains, capital gains tax may apply depending on fund type and holding period.
Fund Quality
A fund being regular does not automatically mean it should be continued. Check performance, risk, consistency and role in your portfolio.
SIP Status
Your old SIP in the regular plan may not automatically become a direct SIP. You may need to stop the regular SIP and start a fresh SIP in the direct plan. For example: If you switch existing units but the old SIP continues, future instalments may still go into the regular plan.
Goal Timeline
Switching makes more sense when you plan to stay invested for long enough to benefit from lower costs. Suppose, if your goal is 10 years away; direct-plan savings can compound. If you need the money in two months, the benefit may be limited.
Switch Cost
Compare the long-term savings with the immediate cost of switching. The direct plan may be cheaper, but exit load and tax can affect the final decision. For example, if switching saves ₹3,000 a year but creates ₹10,000 of tax and load today, then you need your savings to recover the cost.
What Happens After You Switch From Regular To Direct Mutual Funds?
After switching, your investment moves from the regular plan to the direct plan of the mutual fund scheme. The direct plan has its own NAV, expense ratio and transaction details.
Your number of units may change because regular and direct plans have different NAVs. This is normal. What matters is the value transferred after applicable charges and the NAV used for the switch.
After the switch, future returns come from the direct plan. Since the direct plan usually has a lower expense ratio, it may improve long-term return potential, but returns are still market-linked and not guaranteed.
Frequently Asked Questions
Regular and direct plans are usually two versions of the same mutual fund scheme. They generally have the same fund manager and similar underlying portfolio, but the cost structure is different. A regular plan includes distributor commission in the expense ratio. A direct plan does not include distributor commission, so its expense ratio is usually lower. That lower cost can improve long-term return potential.
The difference comes mainly from cost. If both plans earn the same gross return before expenses, the direct plan keeps more of that return because its expense ratio is lower. The regular plan deducts higher expenses because distributor commission is built in. Over time, this cost difference compounds. That is why the gap between regular and direct plan values can become larger over long holding periods.
You usually remain in the same mutual fund scheme, but move from its regular plan to its direct plan. For example, if you hold the regular plan of a flexi-cap fund, switching moves you to the direct plan of that same flexi-cap fund. The plan changes, but the scheme strategy generally remains the same.
Switching can involve redemption from the regular plan and purchase into the direct plan. That is why exit load and capital gains tax may apply depending on the fund and holding period. This is different from simply tracking a fund. Tracking only shows your holdings. Switching is an actual transaction.
You may have to pay capital gains tax if the switch creates a gain. The tax depends on the fund type, holding period and applicable tax rules. For example, if your regular plan investment has grown from ₹2 lakh to ₹2.6 lakh, the ₹60,000 gain may be considered for tax when you switch, depending on the fund category and holding period.
Exit load may apply if the fund charges an exit load and your units are still within the exit-load period. For example, if a fund charges a 1% exit load for exits within one year and you switch before one year, the load may reduce the amount moved to the direct plan. Always check the exit load before switching.
Direct plans usually have a different NAV because their expenses are lower. Over time, lower expenses can lead to a higher NAV compared with the regular plan of the same scheme. A higher NAV does not mean the direct plan is expensive. NAV only tells you the price per unit. What matters is the value of your investment and future return after expenses.
Yes, your number of units may change because the regular and direct plans have different NAVs. This is normal. Suppose ₹1 lakh is switched from a regular plan to a direct plan. If the direct plan NAV is higher, you may receive fewer units, but the investment value is based on the amount switched after applicable charges.
Your existing SIP in the regular plan may not automatically become a direct SIP. You may need to stop the old regular SIP and start a new SIP in the direct plan. This is important because otherwise future instalments may continue going into the regular plan, even if you switched the existing units.
ELSS funds have a lock-in period. Units that are still under lock-in generally cannot be redeemed or switched until the lock-in ends. If you hold ELSS regular plan units, check which instalments have completed the lock-in period before planning a switch.
A partial switch may be possible, depending on the AMC and platform rules.\ This can be useful if some units are outside the exit-load period while others are not, or if you want to manage tax impact gradually instead of switching everything at once.
You may first need to track or import your external mutual funds on INDmoney. Once they are visible and eligible, you can evaluate whether switching is supported. This is useful for funds bought through banks, brokers, AMC websites or older platforms.
No. Switching to direct does not guarantee positive returns. It reduces the expense ratio compared with the regular plan, which can improve return potential over time. But the mutual fund still carries market risk, and its NAV can rise or fall depending on the portfolio.
Switch Regular Mutual Funds To Direct Plans
Track your mutual fund portfolio, identify regular plans, review costs, tax and exit load, and switch eligible funds to direct plans on INDmoney.