Why a PAN–MF folio name mismatch will lead to an application being rejected

KYC

What's in a name? A lot, apparently, if you apply to invest in a mutual fund. And that which you're called on your income tax permanent account number (PAN) will not be just as sweet, if there is even the slightest variation.

Effective April 30, if the name on your mutual fund application doesn’t match the name on your PAN card, your application will be roundly rejected. There's no coming back from there—unless you submit a fresh application that is, dotting the i's, crossing the t's and generally ensuring your name is spelled correctly, to the T.

In a move to harmonise how your name appears across official records (the spelling, order, initials), the Securities and Exchange Board of India's KYC rules mandate that your name must be uniform. As a result, if you are investing in a mutual fund folio for the first time, your name and date of birth must be identical to the name on your PAN, and by extension, on your income-tax records.

This rule will affect new investments, and not existing investments. But there are some nuances.

The way it used to be

Until now, your mutual fund used to match your name as per your mutual fund folio (at the time of investment) with your income-tax records (as per your PAN card).

Earlier, after you submitted an MF application, your fund house’s Registrar and Transfer Agent (RTA) used to send your name and date of birth to Protean (the erstwhile NSDL database) or UTITSL, the two government-sponsored agencies in charge of issuing PAN cards.

These agencies would then revert to your fund house (RTA, to be precise) with your name as per Income-Tax Department records, name as per PAN card, PAN valid status, PAN-Aadhaar status and a few more details.

Your RTA used to then match the reverted details with the name on your application. A match used to be drawn using fuzzy logic. For instance, if you had written SK Raja on your MF application, and your PAN has you as Suresh Kumar Raja, it was considered a match and your investment was approved. If you had written your name as Mohd. Irfan in the MF application, and your name as per the Income-Tax department was Mohammed Irfan, it was considered a match. Under this fuzzy logic, at least 60-70 percent of the name had to match.

Also read: Mutual fund KYC: The hurdles and how to overcome them

That’ll change. From now on, the two PAN agencies will not revert with details of your name to your RTA. They will just get back with a ‘Y’ or ‘N’ (yes or no) indicating whether your name as per your MF folio matches your income-tax records. If your name doesn’t match, then your application will be rejected.

New vs existing folios

Existing investors will not be impacted. That is because validation of your name (folio and income-tax records) is a one-time exercise. For existing investors, your MF (through its RTA) would have already done the validation (using the fuzzy logic outlined above). Any subsequent investments in the same folio will not require name validation.

However, if you are investing afresh in a brand-new folio, then your mutual fund will run a name validation.

But there’s a twist. Since the RTA does the check, the validation will be good for all mutual funds that it supports. Assume, for instance, that you have invested in Fund House A, which is serviced by CAMS, one of the two largest RTAs in the Indian mutual funds industry. If you wish to invest in Fund House B, and are doing so for the first time, your name validation will hold if Fund House B is also serviced by CAMS. Hence, your name as per your folio doesn’t need to match exactly with the income-tax record.

But if you were to invest in Fund House C, which is serviced by another RTA, say K-Fintech, and you have never invested in any fund house that K-Fintech services, than you will be subjected to name validation. In such a case, you should ensure that your name matches your PAN.

How similar should a name be?

Make sure your name is exactly as per your PAN <see table>.

Your name in your MF application must match with that on your income-tax records

Any mismatch and your application will be rejected. Roundly.