Mutual Fund Investors Beware! You can’t redeem your MF units if PAN becomes invalid

Mutual Fund (MF) investors will not only face trouble while making any investment, but also won’t be able to take out their own investment money, if their Permanent Account Number (PAN) becomes invalid after June 30, 2021. This is because, as per the recent regulatory guidelines, PAN-Aadhaar linking will become mandatory for any MF transactions with effect from July 1, 2021.

In fact, in a recent exercise carried out with NSDL to identify PANs linked with Aadhaar, Registrar and Transfer Agent (RTA) Computer Age Management Services (CAMS) has already found that some of the PANs furnished by MF investors are invalid as per IT database.

As per SEBI guidelines, for the following transactions, the PAN status of investors should be ‘valid’:

Fresh Purchase

No investments by new investors in any MF schemes or by existing investors in other MF schemes will be possible unless the investors have a valid PAN card.

Additional Purchase

If the PAN becomes invalid, the existing investors will not be able to top up even their existing MF folios through additional purchases.

SIP

The regular investments by the existing investors through Systematic Investment Plan (SIP) will also stop in case the PAN of the investors becomes invalid due to not linking it to their Aadhaar.

STP

Not only fresh and regular investments, but the investments through Systematic Transfer Plan (STP) from one MF scheme to another scheme will also be stopped if PAN becomes invalid.

Redemption

In case the PAN becomes invalid, MF investors can’t even access their own money invested in MF schemes as redemption requests will also be rejected.

SWP

An invalid PAN may also derail the monthly budget of an investor as the redemption through Systematic Withdrawal Plan (SWP) will also stop.

Beware! You may face higher TDS, disruption in banking services from July 1 if you fail to do this

Hence, in case, PAN is returned ‘invalid’ by NSDL, investors may face inconvenience in transacting, because from July 1, 2021 for any MF transaction (Fresh Purchase, Additional Purchases, SIP / SWP / STP, Redemption etc), PAN status of investors should be ‘valid’.

How to solve the problem

In case there is any change in PAN that causes problems in linking it with Aadhaar, existing investors may request the respective AMCs or RTAs for updation of correct PAN.

However, if the given PAN is correct, investors need to take it up first with the Income Tax authorities for making correction in PAN status and – once the correction is made – inform the AMCs/RTAs for making further validations.