STP

A systematic transfer plan sells units of one scheme and buys units of another on set dates, for an amount you choose. Both schemes must belong to the same fund house.

The common use is spreading a large sum into equity over time. For example, ₹6 lakh goes into a liquid fund, and ₹50,000 a month moves into an equity fund for 12 months. The money still waiting in the liquid fund earns a debt return, and the equity fund is bought at 12 different prices, as with a SIP.

• Each transfer is a sale and a purchase. The amount taken from the source fund can create a capital gain, taxed by that fund's rules, and may carry an exit load if the units are recent.
• Stamp duty of 0.005% applies to each purchase in the target fund.
• Frequency can usually be daily, weekly, monthly or quarterly, depending on the fund house.
• Variants exist. Some fund houses offer an STP that moves only the gain made in the source fund, or one whose amount changes with the market.

STP and SWP shows how to set one up.