Micro SIP: Investment tool for people without a PAN card

Many investors are keen to start SIPs of small amounts for their household helps, drivers or other small investors. However, these investors may not have a PAN card or other documentation required for mutual fund investments. In order to facilitate such small-ticket investments, Sebi has withdrawn the requirement of PAN for SIPs that do not exceed Rs. 50,000 in a financial year. Such instalments are called micro SIPs.

Documentation: Micro SIPs are exempt from the requirement of PAN or KYC documentation. However, a copy of a photo identification document, such as the Aadhar card, voter ID or driving licence, issued by the government, needs to be submitted and verified with the originals. A complete list of approved documents is available with the AMCs.

Attestation: The documents provided as identity proof have to be current and valid, self attested by the investor and also attested by an ARN holder registered with Amfi as a mutual fund distributor.

Applicability: Micro SIPs can be opened by individuals, NRIs (not PIOs), minors and sole proprietorships. HUFs or other categories of institutional investors are not eligible for exemptions available for micro SIPs.

No lump sum: The exemption is not available for lump sum investment even if the amount is less than Rs. 50,000. It is available only for SIPs that don't add up to more than Rs. 50,000 in a financial year. More than one SIP can be created by the same investor using the exemption as long as the invested amount does not exceed the Rs. 50,000 limit.

Points to note
1 If the micro SIP documents are found to be defective or incomplete, the investor will receive a deficiency memo and the application will be cancelled.
2 If the fund deposits the cheque of a defective application, the investment will be redeemed at the applicable NAV. No fresh investments will be accepted

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.)