Consolidating plan
Also written Consolidated plan
The same transfer exemption as a scheme merger, but applied one level down — to merging two plans within a single mutual fund scheme, such as combining sub-plans of the same fund.
In plain language
Mutual fund schemes are sometimes split into plans within the same scheme. When two such plans of one scheme are merged, the unit-holder's units in the old plan — the consolidating plan — are exchanged for units in the surviving plan, the consolidated plan.
The tax treatment mirrors the rule for merging whole schemes: this exchange of units within the same scheme is not treated as a transfer, so no capital gains tax arises at the point the plans merge.
How it works
This is the plan-level counterpart to the scheme-level consolidation rule, and the workbook states both in the same breath: any transfer of units held in the consolidating plan of a mutual fund scheme, in consideration of allotment of units in the consolidated plan of that same scheme, is not treated as a transfer.
The carry-over mechanics are identical to the scheme-level rule:
- Period of holding — time held in the consolidating plan is included in the period of holding of the consolidated plan's units.
- Cost of acquisition — the cost of the consolidated plan's units is deemed to be the cost of the units held in the consolidating plan.
The difference from "consolidating and consolidated scheme" is purely one of scope: a scheme-level merger combines two different schemes (subject to the like-category condition); a plan-level merger combines two plans of the same scheme, and does not carry the equity/non-equity matching condition because it is already the same underlying scheme.
A worked example
Illustrative figures.
Ms Bedi holds units in the "regular plan" of a large-cap equity fund, bought for Rs 1,50,000 on 15 June 2019. The AMC later restructures the scheme, folding the regular plan into a single surviving plan of the same scheme. Ms Bedi's regular-plan units are exchanged for units of the consolidated plan.
Because both plans belong to the same scheme, the exchange is not a transfer. Her cost of acquisition for the new units stays at Rs 1,50,000, and her holding period continues to run from 15 June 2019. When she eventually redeems, her long-term or short-term status and her gain are both computed using those original figures, unaffected by the plan merger in between.
Why NISM asks about it
Chapter 13 (Tax Provisions for Special Cases), section 13.9, covers consolidating plan immediately after consolidating and consolidated scheme, using near-identical language scaled down to plan level. Expect a question distinguishing a scheme-level merger (which needs matching categories) from a plan-level merger within one scheme (which does not).
Common exam traps
- A plan merger is within one scheme; a scheme merger is between two schemes. Keep the scope straight.
- No like-category condition applies at plan level — it is already the same scheme, so there is no equity/non-equity mismatch to guard against.
- Cost and holding period both carry over unchanged, exactly as at scheme level.
- No tax at the point of the plan merger — only on eventual redemption of the consolidated plan's units.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Consolidating and consolidated schemeThe mutual fund merger pair — the consolidating scheme is merged away, the consolidated scheme is merged into — where the exchange of units is not treated as a transfer for tax.
- Consolidation of sharesA company merging several of its shares into fewer, higher face-value shares without changing total share capital — not treated as a transfer, so the old cost of acquisition is simply apportioned.