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It is quite common that nowadays you may go to invest in a mutual fund after a gap of few years and the fund house tells you that your KYC (know your client) verification has expire. The KYC is time bound and after the time period, it needs to be renewed. Also, the KYC can become idle for various reasons like not mapping Aadhar or other statutory stipulations of the government or of there has been no activity in that particular account for a long time. One way to overcome this problem is to check your KYC status in advance.
Before investing in mutual funds, it mandatory to complete your KYC process. In fact, all mutual funds houses are mandatorily required to undertake KYC (Know Your Customer) compliance in pursuance of the Prevention of Money Laundering Act (PMLA), 2002. This is a very fundamental part of SEBI (Securities & Exchange Board of India) guidelines for investing in mutual funds. Let us understand the KYC process and its importance.
This process of KYC has been made mandatory by SEBI, the nodal market regulatory agency, so that the transactions are seamlessly linked to the investor. One thing people want to be sure is that there is an audit trail link between your tax filings and your mutual fund investments. The most basic document in KYC is the Income Tax Permanent Account Number (PAN). This PAN is the compulsory document towards Proof of Identity and also serves as a unique link for the stakeholders to map all transactions in the financial markets, be it with stockbrokers, depository participants or mutual funds with tax returns filing.
In addition, it must be known that the KYC compliance process is uniform across all financial markets. When the KYC is done, a KYC Identification Number (KIN) is created by CERSAI for individual customer and this can be quoted in future investments across the various products available in the financial markets.
This is one of the most important questions that investors need to understand. When you are shown as KYC compliant during the KYC process, it essentially implies that the investor has submitted all required documents, which have also been duly accepted by the processing authority. Once the investor becomes KYC compliant, subsequent changes to the residential address, mobile number and email will have to be undertaken through KYC change request only. This will ensure centralized maintenance of data. The advantage here is that the investors can now change the address, mobile number, email details etc in all the mutual fund investments with just one single application.
There is a small regulatory change in the KYC process that you need to be familiar with. Till the year 2012, certain specified categories of investors were exempt from providing the Income Tax Permanent Account Number (PAN). This was specifically applicable in the case of investors who invest up to Rs.50,000 per year per in mutual funds. This was for the sake of simplicity and such investors could provide approved proof of identity in lieu of PAN.
In the above case, till 2012, it was possible to get a PAN-exempt KYC reference number. Post 2012, any redemption of units requires you to be PAN KYC compliant as PAN number has to be quoted. There is no value limit and even if you redeem a very small amount, the PAN number has still got to be quoted. This made it mandatory for PAN exempt investors to update their KYC details since PAN was now mandatory to redeem their investments from mutual funds. Effectively, now PAN based KYC is mandatory for all, irrespective of size.
For PAN based KYC, the Following documents can be submitted by the investor as proof of identity.
At the time of the KYC, the investor must present any of the above documents photocopied and signed. They must carry originals for verifications.
Here are the documents that can be submitted as proof of residence (any of these)
Here is how an investor can go about check the status of their mutual fund KYC before investing, to avoid any last minute surprises. Investors can check the status of KYC compliance through the website of any of the 5 KYC Registration Agencies (KRAs) as under.
Now, here is how to check the KYC status. The investor can enter the PAN and verify that he / she is not a robot by inputting the captcha code. This way, they can check the KYC status. Here are the two ways to check the KYC status for two different types of investors.
Remember that fresh investments in mutual funds cannot be made if your KYC process has not been completed. It is always a good idea to first check your KYC status on the mutual fund company’s website or the mutual fund app and update it correctly. Ideally, download the screenshot of KYC status and set a reminder to do the KYC renewal well in advance of expiry.
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