You Can’t Redeem Mutual Fund Units if PAN Becomes Invalid

Are you looking for an inflation-beating return? Do you seek an investment that can help you attain long-term financial goals? You may consider investing in equity mutual funds. However, you need a valid PAN card to invest in mutual funds or continue with your mutual fund investments. As per regulatory requirements, you must link PAN with your Aadhaar for any mutual fund transactions with effect from 01 July 2021. You can’t invest in mutual funds or withdraw your investment money after 30 June 2021, as your PAN will be invalid if it’s not linked with Aadhaar. 

SEBI guidelines: MF investors must have a valid PAN

According to SEBI guidelines, both new and existing investors cannot invest in any mutual fund scheme without a valid PAN card. Moreover, you cannot top up your existing mutual fund folio through additional purchases if your PAN becomes invalid. It means you must link your PAN with Aadhaar by 30 June 2021 if you want to invest in mutual funds or purchase more units. 

You must have a valid PAN to invest in mutual funds through the Systematic Investment Plan or SIP. It is a way of investing small amounts of money regularly in a mutual fund scheme. You will find your existing SIPs in mutual funds stopped if you don’t link PAN with your Aadhaar. 

You may opt for the Systematic Withdrawal Plan or SWP if you seek regular cash flows from your mutual fund investments. It is a facility offered by the AMC which allows you to withdraw predetermined amounts at regular intervals from your existing mutual fund investments. You can choose a day of the month, quarter or year for the withdrawal, and the AMC credits the amount to your bank account. 

You may opt for the SWP if you seek regular supplementary income. It helps if you link PAN with Aadhaar before the deadline if you want to continue the systematic withdrawal plan in your mutual fund schemes. 

You can transfer money from one mutual fund scheme to another scheme of the same fund house through a systematic transfer plan or STP. For instance, STP helps you invest a lump sum amount in a mutual fund scheme and regularly transfer a fixed or variable amount to another mutual fund scheme. 

You could face problems with mutual fund transactions if your PAN is returned invalid by the NSDL. You will need a valid PAN from 01 July 2021; if you intend to purchase new or additional mutual fund units, start a SIP, STP, SWP or redeem units from your mutual fund schemes. 

If there is a change in your PAN and you face difficulties linking it to the Aadhaar, you could request the AMC or the Registrar and Transfer Agent (RTA) to update the correct PAN. However, if your PAN is correct, you could take up the issue with the Income Tax authorities to make corrections in the PAN status. You could then inform the AMC and RTA for further validation. 

You must link your PAN with Aadhaar by 30 June 2021 for hassle-free mutual fund transactions. Otherwise, your PAN gets cancelled, and you cannot use it for financial transactions. In a nutshell, you can’t invest in mutual funds or redeem existing mutual fund investments with an invalid PAN.

For any clarifications/feedback on the topic, please contact the writer at cleyon.dsouza@cleartax.in