Systematic Transfer Plan (STP)
An STP is a facility offered by AMCs that allows investors to automatically transfer a predefined sum or number of units from a source scheme (typically a liquid or debt fund) to a target scheme (typically an equity fund) at regular intervals — daily, weekly, monthly, or quarterly.
How STP Works
The investor places a lump sum in a source fund and registers a transfer instruction specifying amount and frequency. On each transfer date, units are redeemed from the source fund at its NAV and simultaneously invested into the target fund at its NAV. This continues until the source balance is exhausted or the instruction is cancelled.
Types of STP
- •Fixed STP: A constant amount is transferred at each interval.
- •Flexi STP: The transfer amount varies based on market conditions or a defined formula.
- •Capital appreciation STP: Only the gains accrued in the source fund are transferred, keeping the principal intact.
Tax Implications
Each transfer constitutes a redemption event from the source fund and is subject to applicable capital gains tax. Transfers from liquid/debt funds held under three years attract Short-Term Capital Gains (STCG) tax at the investor's slab rate.
Common Use Case
STPs are frequently used by investors who receive a lump sum (such as a bonus or maturity proceeds) and prefer to spread equity exposure over time rather than investing the entire amount at once — distributing entry points across market levels. All STP transactions are subject to the source fund's exit load policy.