Sir - Is having MFs in Demat form advantageous rather than in physical possession? I shall be grateful for your advice.

Ans: You have asked an important question.
Many investors still hold mutual funds in physical format.
Let us break this into smaller points for better clarity.

Do You Need a Demat Account?

No, a demat account is not mandatory to redeem physical mutual funds.

Mutual funds are not shares.

You can redeem them without a demat account.

Mutual fund units are not traded on the stock exchange.

Hence, demat is not needed unless you hold ETFs.

For regular mutual fund units, you can redeem directly through the AMC.

How Can You Redeem Physical Mutual Funds?

You have the following options to redeem:

Visit the AMC or registrar (like CAMS, KFintech) office.

Submit a physical redemption request form.

Mention the folio number, units to redeem, and bank details.

Redemption amount will be credited to your bank account.

Keep your PAN and ID proof when you go to the office.

Can the Broker Help You in Redemption?

If you bought the MF from a broker or MFD (Mutual Fund Distributor), they can assist.

A good MFD with CFP credential will help with paperwork and tracking.

They will guide you on form filling and submission.

Some may also do the submission on your behalf.

They may charge a nominal service fee for their effort.

Why You Should Move from Physical to Digital Mode

Here are reasons to shift from physical to online mode:

Easy tracking and monitoring of portfolio.

Faster redemption and transaction processing.

Reduce risk of losing physical statements.

Avoid paperwork every time you redeem or invest.

Get consolidated view across funds.

You can convert physical MF units to digital through “dematerialisation” or “statement of account” mode.

Dematerialisation vs SOA (Statement of Account)

You have two options if you want to go digital:

1. Dematerialisation Route:

You open a demat account.

Submit conversion form with depository participant.

Units get credited to your demat account.

But demat route involves annual charges.

Also, brokerage firms may push other products.

2. SOA Route (More Ideal):

Keep units in non-demat digital format.

Can be viewed using common platforms like CAMS, KFintech, or MF Central.

No demat charges or brokerage intervention.

Preferred for long-term investors and retirees.

Role of MFD with CFP Credential

Working with a certified MFD brings the following advantages:

Ongoing guidance on fund performance.

Help with timely redemptions and switches.

Monitor your goals and suggest changes.

Help in nomination, transmission and FATCA updates.

Avoid common investor mistakes.

Provide 360-degree financial planning support.

Many investors holding direct funds miss this help.
That leads to confusion and missed opportunities.
Direct plans only suit highly experienced investors.

Disadvantages of Direct Plans

Let’s explore why regular plans through MFDs are better:

No personalised guidance or support in direct plans.

Difficult to know when to redeem, switch or hold.

No goal-based fund selection.

No handholding during market falls.

Many direct plan investors chase returns and exit early.

If you value time, clarity, and peace of mind, regular plan through a CFP-backed MFD is better.
The cost difference is small, but value delivered is huge.

Useful Tips Before Redeeming Mutual Funds

Please check these before redeeming:

Know the exit load, if applicable.

Understand if fund has any lock-in period (ELSS has 3 years).

Ensure your bank details are updated in folio.

Avoid redeeming in panic due to market fall.

If the fund is still good, better to stay invested.

Discuss with your MFD before redeeming.

Link PAN, Aadhaar, and nominee if not already done.

Tax Rules on Mutual Fund Redemption (2024 onwards)

Mutual fund redemption is taxed based on fund type and holding period:

Equity Funds:

If held for more than 1 year:

LTCG (Long Term Capital Gains) above Rs 1.25 lakh taxed at 12.5%.

If held for less than 1 year:

STCG (Short Term Capital Gains) taxed at 20%.

Debt Funds:

No indexation benefit anymore.

Both STCG and LTCG taxed as per your income tax slab.

Tax impact should be reviewed before redeeming.
A CFP-backed MFD will help you plan this smartly.

Final Insights

No, you do not need a demat account to redeem physical mutual funds.

Your broker or MFD can definitely help you with the redemption process.

Try to shift to digital format via SOA for ease and safety.

Avoid direct plans if you need personalised service and fund strategy.

Plan redemptions smartly with exit load and tax in mind.

Stay invested if the fund is aligned with your long-term goal.

A Certified Financial Planner partnered with an MFD can give you the right guidance.

You deserve worry-free investing with a reliable expert by your side.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Dear Sir,

Good question ????. Mutual funds in India can be held either in physical (statement of account/folio-based) form or in demat form. Both are safe, but here’s the comparison for clarity:

???? Physical (Folio / Statement form)

Units are held directly with the AMC / Registrar (CAMS, KFintech).

Safety is very high — backed by SEBI & AMFI regulations.

Easier to transact via AMC website, MFU, or through your MFD/Distributor.

No demat/DP charges.

Recommended for long-term investors.

???? Demat Form

Units are held in your demat account (NSDL/CDSL).

Convenient if you want to see MF + Stocks + Bonds in one place.

But, annual maintenance charges (AMC) & transaction charges apply.

If you stop maintaining the demat account, it can cause unnecessary hassles.

? Which is better?
For most retail investors, Physical (Folio-based / SOA) is simpler, cost-effective, and equally safe. Demat makes sense only if you are an active stock investor and want everything consolidated in one account.

???? So, both are safe, but if you want to avoid extra costs and keep it flexible, stick with folio-based (physical form).


Best regards,
Naveenn Kummar, BE, MBA, QPFP
Chief Financial Planner | AMFI Registered MFD
https://members.networkfp.com/member/naveenkumarreddy-vadula-chennai

Ans: MFs can be held either in demat or non-demat form but not in physical form. Both the options are equally safe.

You can connect with a a professional Certified Financial Planner - a CFP to start investing in Mutual Funds with proper guidance and strategy. A CFP will guide you with exact funds to invest in keeping in mind your age, requirements, financial goals and risk profile.

Best Regards,
Reetika Sharma, Certified Financial Planner
https://www.instagram.com/cfpreetika/

Ans: The Dmat form is easy to liquidate and manage, allowing for the use of instruments such as systematic transfers to more efficient funds or systematic withdrawals if required regularly, without hassle.