Know About Mutual Funds Cut Off Time 

In mutual fund transactions, the time of receipt of the transaction and money affects the applicable Net Asset Value (NAV). To bring uniformity in the operational processes, SEBI (Securities & Exchange Board of India) has prescribed the cut-off timings for mutual fund transactions across all the mutual fund houses. Therefore, mutual fund transactions are processed based on the prevailing NAV of the respective scheme, if the fund house receives the transaction/ funds before the cut-off time.

Earlier, SEBI had allowed the processing of investment transactions depending upon the receipt of the investment transaction before the cut-off time. The funds towards the investment amount would follow later as banking procedures. However, the fund house must receive the investment amount before the prescribed cut-off time for mutual funds to process investment transactions.

If the investment amount is received by the fund house first and then followed by the transaction request, the cut-off time will be seen in respect of the submission of the transaction request. For redemption or switch transactions, the transaction request must be received before the prescribed cut-off time to be processed on the same day.

The mutual fund transactions must be received digitally or at the official Points of Acceptance before the cut-off timings to be considered for NAV applicability as per the prescribed guidelines. Depending upon the practical issues in receiving and utilising the investment amounts and processing redemption proceeds, the NAV applicability differs for liquid/overnight funds and other funds. For investment transactions in liquid and overnight funds, clear funds must be received by the fund house before 1.30 PM to consider them for processing on the same day.

In contrast, the investment transactions in other funds and redemption transactions for all funds must be received by the mutual funds before 3 PM for processing the transaction for NAV of the same day.

The summary of the respective cut-off time for mutual funds is as under. This is applicable Where the purchase transaction is received on a business day at the official point(s) of acceptance and funds for the entire amount of subscription/purchase are available for utilization on the same Business Day.

Source: AMFI India

The transactions received before the cut-off time in mutual funds are processed on the same day, and the applicable NAV will be as per the table above. However, the transactions received after the cut-off time are processed on the next business day.

As such, the cut-off time for mutual fund redemption is 3:00 PM. Further, the cut-off time for equity mutual funds and debt mutual funds is the same for investment and redemption except for investment transactions in overnight and liquid funds. If the transaction requests are received after the cut-off time, the transactions are processed on the next business day.

Since the switch transactions include redemption and a new investment transaction, the switch out and switch in transactions may be processed on two separate business days. This is because the redemption proceeds for switch out transactions will be processed as per the regular settlement cycle. The mutual fund house will process the switch in transaction into the new mutual fund scheme once the redemption proceeds of the switch out transaction have been received by them.

Applicable Price for Mutual Funds Transactions 

All the mutual fund transactions are processed at the prevailing NAV for the mutual fund scheme. The fund house calculates such NAV after the fair valuation of all the portfolio investments and other assets and deducting the scheme liabilities from such amount.

The resultant amount is divided by the total outstanding units to calculate the NAV per unit, which is disclosed by all fund houses on all business days. However, investors may not make their investment decisions based on whether the NAV is higher or lower. This is because high or low NAV may not be a practical indicator of fund performance.

Once the cut-off time condition has been fulfilled, the mutual fund transactions are processed for investment/ redemption/ switch. The transactions happen at the prevailing NAV (Net Asset Value) for that business day, except for investment transactions in overnight & liquid funds wherein the NAV as applicable for the preceding day is applied for the funds received before the cut-off time.

The fund houses calculate NAV following SEBI Guidelines by valuing all the scheme assets and liabilities at market price. Once the scheme portfolio has been valued, the aggregate valuation is divided by total issued units to arrive at NAV per unit. Such NAV, calculated up to four decimal places, must also be made public for all mutual fund schemes daily.

Since cut-off time is crucial for determining the NAV applicability for processing the transactions, knowing such timings can enable the investors to ensure that the transactions are processed on the same day as the transaction request. While sometimes the delay in processing may be attributable to the banking delays in funds transfer beyond the investor’s control, it makes sense to make all the possible efforts for the transaction to be requested well before the cut-off time to ensure timely processing.

Cut-off timings are an essential determinant of the NAV applicability for mutual fund transactions. Investors can confirm the respective NAV applicability from the transaction statement received from the mutual fund transaction after the transaction has been processed.

Disclaimers: The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her or their own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws/finance bill 2020. Any action taken by you on the basis of the information contained herein is not intended as on offer or solicitation for the purchase and sales of any schemes of UTI mutual Fund. Please read the full details provided in SID and SIA carefully before taking any decision.

UTI AMC Ltd is not an investment adviser, and is not purporting to provide you with investment, legal or tax advice. UTI AMC Ltd or UTI Mutual Fund (acting through UTI Trustee Company Pvt. Ltd) accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from your use of this document, howsoever arising, and including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, mistake or inaccuracy with this document, its contents or associated services, or due to any unavailability of the document or any part thereof or any contents or associated services.