Mutual Funds

FAQs on mutual funds - Guidelines to invest

| Updated on August 13, 2011

If your e-mail address has been registered in your folios, you can receive statements even if you did not have the actual folio numbers.

Several general queries are received from investors on their mutual fund transactions, folios and on the rules and guidelines governing their investments. We answer some of these frequently asked questions.

I have started a Systematic Investment Plan (SIP) in an Equity-Linked Savings Scheme (ELSS) in July 2008 for three years ending July 2011. However, I am unable to redeem my complete investment now after three years, as the mutual fund says that the units are under lock-in. Why is this so?

When an investment is made in a tax-saving ELSS scheme through SIP, every SIP instalment is treated as a fresh investment and the units are locked for three years, as per the guidelines governing ELSS. Each SIP investment has to complete the compulsory three-year lock-in.

In July 2011, the three-year lock-in for the first instalment gets over, and these units can be redeemed. Subsequent instalments are still locked in. For the last SIP instalment made in July 2011, the lock-in ends in July 2014.

Similarly, in a tax-saving scheme, every time dividend is reinvested, it is similar to a fresh purchase being made by you. For example, if you invested in March 2008, and a dividend was declared and reinvested in March 2009, the reinvested amount would be taken as a fresh purchase in March 2009, and the units would be locked-in for 3 years.

Investors may change the option from ‘Reinvest' to ‘Dividend Payout' to avoid any future lock-in. This may be done by sending a simple, signed, written request.

I wish to see the NAV of my schemes daily. Where can I see it?

The Association of Mutual Funds in India (AMFI) publishes the Net Asset Value (NAV) of all schemes daily and you can view the same at http://www.amfiindia.com.

Investors may also visit www.camsonline.com and get NAV information from ‘Online Services for Investors'. They can also subscribe to receive NAV details at their email addresses.

I have made a change from the ‘dividend' option to the ‘growth' option in a scheme. If the scheme remains the same, why is Securities Transaction Tax (STT) deducted as though it was redemption?

In a mutual fund, the ‘growth' and ‘dividend' options are treated as two different schemes. A ‘change of option' between the ‘dividend' and ‘growth' plans is thus actually a ‘switch' from one scheme to the other.

A ‘switch' involves redemption in one scheme and a purchase into another scheme.

Therefore, in effect, you have redeemed from one scheme and invested into another. As per the current tax guidelines, STT is deducted for redemptions, and thus the applicable STT has been deducted in this case.

I have investments in two funds. I need account statements and do not have a record of the folio numbers. What should I do?

You can call the toll-free number of the registrar of the fund, give your name and Permanent Account Number (PAN), city and pin-code. The executives will be able to identify your folios and send you a statement.

In this regard, it would be worthwhile to mention that if your e-mail address was registered in your folios, you could receive statements even if you did not have your folio numbers.

(Contributed by CAMS Viveka, an Investor Education Initiative from CAMS. The views expressed herein are general practices in the mutual fund industry and may vary on a case-to-case basis.)

Published on August 13, 2011

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