A Systematic Transfer Plan, or STP, moves a fixed amount from one mutual fund scheme to another scheme of the same fund house at regular intervals. Most commonly, you place a lumpsum in a liquid or short-term debt fund, and a set amount is transferred each week or month into an equity or hybrid fund.
Think of it as a SIP funded from your own parked money instead of your bank account. The parked balance may earn debt-fund returns while it waits, and the equity side is bought gradually, so you are not exposed to a single entry date. It can also be used in reverse, moving gains from equity to debt as a goal approaches.
Who it suits
- Investors with a large sum wary of market timing
- Retirees moving benefits gradually into equity
- Goal-savers shifting to debt as the goal nears
How STP works
- 1
Invest in the source fund
The lumpsum goes into a liquid or short-term debt fund of the chosen fund house.
- 2
Set amount and period
Decide the transfer amount, frequency and number of instalments, for example 12 monthly transfers.
- 3
Automatic transfers
On each date, units of the source fund are redeemed and the amount buys units in the target fund.
- 4
Review the mix
We check the progress and adjust if your goal or the market situation changes.
Why families choose it
Staggered entry
Spreads equity purchases over months, lowering the impact of investing just before a fall.
Idle money works
The balance waiting in the source fund may earn more than a savings account, though this is not assured.
Disciplined
Transfers happen automatically, so the plan does not depend on reading the market.
Works in reverse
Near a goal, an STP from equity to debt can protect gains already made.
Things to know, and risks
- Each transfer is a redemption from the source fund, so it may create a taxable gain.
- Source and target funds must be from the same fund house, which limits the choice of schemes.
- If markets rise steadily during the STP period, a one-time investment might have done better.
- Exit loads can apply on the source or target fund depending on the scheme and holding period.
Tax treatment
Every transfer counts as a sale of units in the source fund. Gains on a liquid or debt fund bought on or after 1 April 2023 are taxed at your slab rate, though the gain on each short-parked transfer is usually small. When you later redeem the target equity fund, equity tax rules apply from each transfer date. Tax rules change, so confirm with your tax professional.
For families in Tirupati
We often use STPs for Tirupati retirees who receive gratuity and leave encashment together and feel uneasy putting it all into equity on one day. NRIs from Chittoor district sending home a large amount after a contract ends use it the same way. Business owners who sell stock or property and want equity exposure without guessing the market find the gradual approach easier to live with.
Run the numbers
STP Calculator
A Systematic Transfer Plan lets you park a lumpsum in a debt fund and move a fixed amount into an equity fund every month. This calculator shows how much may sit in each fund over time, with each growing at its own assumed rate. It helps when you have a large amount but prefer not to enter equity on a single day.
Frequently asked questions
What is the difference between SIP and STP?
A SIP invests money from your bank account, while an STP moves money you have already invested in one fund into another. Both invest in instalments. STP suits a lumpsum you already hold; SIP suits regular income.
How long should an STP run?
Most STPs run between six and twelve months, though longer periods are possible. A shorter STP gets money into equity faster; a longer one spreads timing risk more. We choose the period based on the amount and your comfort with market swings.
Is STP taxable?
Yes, each STP transfer is treated as a redemption from the source fund, so any gain is taxable. From a liquid or short-term debt fund held briefly, that gain is usually modest and taxed at your slab rate for units bought after 1 April 2023.
Can I do an STP between two different fund houses?
No, an STP works only between schemes of the same fund house. To move money across fund houses you must redeem from one and invest in the other manually, which counts as a separate sale and purchase.
Which fund is used as the source in an STP?
The source is usually a liquid, overnight or ultra-short duration fund because their values move less day to day. These are not free of risk, but their price swings are generally small compared with equity funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This page is for general information and is not a recommendation to buy any specific product.
Last reviewed 12 Oct 2026.