How to Withdraw Money From Mutual Funds in 2024 (2024)

Uncover the steps and essential tips to make the most of your investments and achieve financial freedom.

EXPLORE FUNDS

Withdraw Money from Mutual Fund

EXPLORE FUNDS

4 mins

08 March 2024

Mutual funds are a popular investment option for many people who want to diversify their portfolio and earn returns over time. However, there may be situations when you need to withdraw money from your mutual funds, either partially or fully. Read on to know how you can do so with ease.

What does redemption from mutual funds mean?

Withdrawal, known as redemption in mutual funds, involves liquidating investments by selling units owned in a mutual fund scheme at the prevailingNet Asset Value (NAV). When you withdraw funds from a mutual fund, you essentially redeem a certain number of units you own and receive their value.

For instance, if you hold 10,000 units of a mutual fund scheme and each unit is priced at Rs. 10, you can opt to redeem a specific number of units or withdraw a certain amount in currency terms. For instance, if you wish to withdraw Rs. 50,000, you would need to redeem 5,000 units from your mutual fund holdings. Similarly, you have the flexibility to redeem 100 units, 9,000 units, or any other number to withdraw the corresponding amount from your mutual fund portfolio.

Types of mutual fund redemptions

Mutual fund redemptions offer investors flexibility in managing their investments, allowing them to access their funds when needed. There are two main types of mutual fund redemptions: partial withdrawal and full withdrawal.

1. Partial Withdrawal:

  • Partial withdrawal refers to the process of redeeming only a portion of the total investment in a mutual fund while keeping the remaining amount invested.
  • Investors may opt for partial withdrawals when they need funds for specific purposes or expenses without liquidating their entire investment.
  • The amount withdrawn is typically transferred to the investor's bank account or provided in the form of a cheque, depending on the redemption method chosen by the investor.
  • After a partial withdrawal, the investor's remaining investment in the mutual fund continues to earn returns and remains subject to market fluctuations.

2. Full Withdrawal:

  • Full withdrawal, also known as complete redemption, involves liquidating the entire investment in a mutual fund scheme.
  • Investors choose full withdrawal when they need to access all their funds for various reasons such as major expenses, financial goals, or portfolio restructuring.
  • Upon full redemption, all units held by the investor in the mutual fund scheme are sold, and the proceeds are credited to the investor's designated bank account or provided through a cheque.
  • Once the full withdrawal is executed, the investor no longer holds any investment in the mutual fund scheme, and the relationship between the investor and the fund is terminated.

It's important for investors to consider the implications of both partial and full redemptions on their investment objectives, financial goals, and tax implications. Additionally, investors should review the terms and conditions associated with redemptions, including any applicable exit loads, redemption fees, and processing times, which may vary depending on themutual fund scheme and the fund house.

Ways to redeem a mutual fund

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How to withdraw money from Mutual Funds

  • Through an asset management company or transfer agent: You can visit the website or the branch office of the asset management company (AMC) or the registrar and transfer agent (RTA) of your mutual fund and submit an online request or offline redemption request. You will need your folio number, PAN, and bank details to complete the process. You will receive the redemption amount in your bank account within a few days, depending on the type of fund.
  • Through an agent or broker or platform: If you have invested in your mutual fund through an agent or broker or an online platform like Bajaj Finserv Platform, you can put in the redemption request. The agent or broker or platform will process your request and you will receive the redemption amount in your account.
  • On your own (online): If you have invested in your mutual fund directly without any intermediary, you can redeem it on your own. You will need to visit the website of your mutual fund and log in with your credentials. You will need to select the fund and the number of units you want to redeem and confirm your request. You will receive the redemption amount in your bank account within a few days, depending on the type of fund.

Reasons for Mutual Fund Redemption

  • To meet your financial goals: You may have invested in your mutual fund with a specific financial goal in mind, such as buying a house, funding your child’s education, or planning your retirement. When you achieve your goal or are close to achieving it, you may want to redeem your mutual fund and use the money for your purpose.
  • To rebalance your portfolio: You may have invested in your mutual fund with a certain asset allocation, such as 60% equity and 40% debt. Over time, due to market fluctuations, your asset allocation may change, such as 70% equity and 30% debt. This may increase your risk exposure and deviate from your investment objective. To restore your original asset allocation, you may want to redeem and invest in other funds.
  • To switch to better performing funds: You may have invested in your mutual fund with an expectation of a certain return. However, over time, you may find that your mutual fund is underperforming compared to its benchmark or peers. You may also find that there are other funds that offer better returns, lower costs, or higher ratings. To improve your returns and optimize your portfolio, you may want to redeem and switch to a better performing fund.
  • To deal with an emergency: You may have invested in your mutual fund with a long-term horizon. However, life is unpredictable, and you may face an emergency situation, such as a medical emergency, a job loss, or a family crisis. To deal with such situations, you may need to access your money quickly and easily by redeeming your mutual fund.

Can one withdraw mutual funds anytime?

  • Redeemable at any time, open-end schemes offer flexibility for investors. Yet, ELSS investments differ, imposing a mandatory three-year lock-in period.
  • With open-end schemes, whether in equity or debt, mutual funds maintain liquidity, allowing investors to easily withdraw their investments without any specific constraints.

Is it advisable to exit from mutual funds at any time?

Exiting mutual funds without a prolonged investment horizon is not recommended. Typically, the rule of thumb is to remain invested for four to five years for better equity fund returns and two to three years for debt funds. For long-term mutual fund investments, it is advisable to refrain from unnecessary withdrawals to allow your funds to grow steadily. Market fluctuations are inherent, and maintaining a steadfast approach without succumbing to panic selling is crucial. Utilising a mutual fund calculator can help track performance and reinforce your commitment to long-term financial goals.

Tax implications of mutual fund withdrawals

When selling mutual fund shares, investors may encounter capital gains or losses, the tax treatment of which is contingent upon the duration of their investment. If the holding period of the fund units is less than one year, any gains or losses incurred are categorised as short-term capital gain/loss. Conversely, if the holding period exceeds one year, the gains or losses are classified as long-term capital gain/loss.

In India, short-term capital gains are taxed at a rate of 15%, while long-term capital gains are taxed at 20%, with an exemption of Rs. 1 lakh on equity-oriented mutual funds.

Factors to consider while submitting a mutual fund redemption request

  • The type of fund: Different types of mutual funds have different liquidity, risk, and return profiles. You should choose the type of fund that suits your investment objective, risk appetite, and time horizon.
  • The lock-in duration: Some mutual funds have a lock-in period, which means you cannot withdraw your money before a certain period. For example, tax-saving funds or ELSS (Equity Linked Savings Scheme) have a lock-in period of three years, which means you cannot redeem them before completing three years from the date of investment. You should check the lock-in duration of your mutual fund before investing and redeeming.
  • The exit load: Exit load is a fee that is charged by the fund house when you withdraw money from your mutual fund before a specified period. For example, some funds may charge an exit load of 1% to 2% if you redeem your investment within a certain time period. The exit load reduces your net redemption value and affects your returns. You should check the exit load of your mutual fund before investing and redeeming.
  • The holding period of the mutual funds: The holding period of your mutual funds determines the tax implications of your redemption. If you redeem your equity funds within one year of investment, you must pay short-term capital gains tax at 15%. If you redeem after one year, you must pay long-term capital gains tax at 10% on the gains exceeding Rs. 1 lakh in a financial year.
    Similarly, if you redeem your debt funds within three years of investment, you must pay short-term capital gains tax as per your income tax slab. If you redeem after three years, you must pay long-term capital gains tax at 20% with indexation benefit. You should consider the tax implications of your redemption and plan accordingly. Tax laws are subject to amendments made to it from time to time. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax and/or investment advice. Please consult your tax advisor, before making in any investment decision based on the above.

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Frequently asked questions

Can I withdraw money from mutual funds anytime?

Yes, you can withdraw money from most mutual funds anytime, unless they have a lock-in period.

What is the right time to redeem mutual funds?

The right time to redeem mutual funds depends on your financial goals and the performance of the fund. You should redeem your units when you are close to achieving your goal or when the fund is not meeting your expectations.

Is there any lock-in period for mutual fund redemption?

Some mutual funds have a lock-in period, which means you cannot redeem your units before a certain time. For example, tax-saving funds (ELSS) have a lock-in period of three years.

Can I redeem only a portion of my mutual fund investment?

Yes, you can redeem only a portion of your investment. You can either specify the number of units or the amount you want to redeem.

How are taxes calculated on mutual fund redemption?

  • Taxes on mutual fund redemption are calculated based on the type of fund, the holding period, and the capital gains. Equity funds are taxed at 15% for short-term gains and 10% for long-term gains. Debt funds are taxed according to your income tax slab for short-term gains and 20% for long-term gains. Tax laws are subject to amendments made to it from time to time. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax and/or investment advice. Please consult your tax advisor, before making in any investment decision based on the above.

When to withdraw money from mutual fund?

Withdraw money from mutual funds when you need funds for financial goals, emergencies, or if your investment objectives change, but consider potential tax implications and market conditions.

What are mutual fund withdrawal rules?

Mutual fund withdrawal rules include understanding exit loads, capital gains taxes, and redemption procedures, typically allowing investors to redeem units partially or fully, subject to fund-specific terms and conditions.

What is mutual fund withdrawal process?

The mutual fund withdrawal process involves submitting a redemption request through the fund house's online portal or physical form, specifying the number of units or amount to be redeemed, followed by the crediting of funds to the investor's registered bank account.

How much can I withdraw from mutual fund?

The amount you can withdraw from a mutual fund depends on your investment value, redemption terms, and any applicable exit loads or penalties, with most funds offering the flexibility to partially or fully redeem units based on investor requirements.

How do mutual funds make money?

Mutual funds make money through various avenues, including management fees charged to investors, performance-based fees, sales loads, and investment returns generated from the fund's underlying assets, such as dividends, interest, and capital gains.

How do I get my money out of mutual funds?

To withdraw money from mutual funds, submit a redemption request to the fund house. The process involves filling out a redemption form, specifying the amount you wish to withdraw. Keep in mind that certain funds may have exit loads.

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Disclaimer

Bajaj Finance Limited (“BFL”) is a Non-Banking Financial Company carrying the business of acceptance of deposits, providing lending solutions to Retail & Corporate customers, and is a Corporate agent of various insurance Companies. BFL is also registeredwith the Association of Mutual Funds in India (“AMFI”) as a distributor of third party Mutual Funds (shortly referred as ‘Mutual Funds’).

BFL does NOT:

(i)provide investment advisory services in any manner or form;

(ii)perform risk profiling of the investor;

(iii)carry customized/personalized suitability assessment;

(iv)carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.


In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on ‘As-is’ basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme /Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities. The NAV will inter-alia be exposed to Price / Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other / better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Bajaj Finserv Direct Limited, (“BFDL”), a wholly owned subsidiary of Bajaj Finserv Limited (is a Registered with SEBI as an Investment Advisor with Registration no. INA000016083). BFDL enables resident Indian customers to directly invest in third party mutual funds through its online platform. BFDL entered into a referral arrangement with BFL, whereunder, BFL may, without risk or responsibility on its part, refer the resident Indian customers who are interested in placing their investments in Direct Mutual Funds through BFDL online platform. Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc. and shall also consult their financial advisers, if they are unsure about the suitability of the scheme before investing

How to Withdraw Money From Mutual Funds in 2024 (3)

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How to Withdraw Money From Mutual Funds in 2024 (2024)

FAQs

What is the best way to withdraw money from mutual funds? ›

Utilizing a Broker or Distributor

If you invested through a broker or distributor, you could withdraw money from a Mutual Fund plan through them. Contacting your broker and requesting a withdrawal are options. You must complete and submit a withdrawal request form if you want to withdraw offline.

Can you take all your money out of a mutual fund? ›

Are you worried about losing access to your money once invested in a Mutual Fund? In fact, you'll have complete freedom to withdraw your money whenever you need. Many investors think their money is blocked since they may have to undergo a cumbersome redemption process.

How do you request redemption of mutual funds? ›

You simply have to log-on to the 'Online Transaction' page of the desired Mutual Fund and log-in using your Folio Number and/or the PAN, select the Scheme and the number of units (or the amount) you wish to redeem and confirm your transaction.

When should you cash out a mutual fund? ›

However, if you have noticed significantly poor performance over the last two or more years, it may be time to cut your losses and move on. To help your decision, compare the fund's performance to a suitable benchmark or to similar funds. Exceptionally poor comparative performance should be a signal to sell the fund.

How much tax will I pay if I cash out my mutual funds? ›

Short-term capital gains (assets held 12 months or less) are taxed at your ordinary income tax rate, whereas long-term capital gains (assets held for more than 12 months) are currently subject to federal capital gains tax at a rate of up to 20%.

How long does it take to cash out mutual funds? ›

Mutual funds/ETFs/stocks
Mutual Funds
Settlement period:From 1 to 2 business days
Short sales allowed?No
Limit and stop orders allowed?No
Trading fees?Funds may charge sales loads, as well as short-term redemption fees and other transaction fees
2 more rows

How do I transfer money from mutual funds to my bank account? ›

If you have invested money through a distributor, you can place a request with him or her for the redemption of units. Following that, your distributor will send the request to the AMC office or RTA. Once the process is completed, the money will be sent to your bank account.

How long do you have to hold mutual funds? ›

For most mutual funds categories, there is no prescribed holding period, however factors such as exit load, capital gains tax, performance, liquidity and financial goals should be taken into consideration when deciding the ideal period to stay invested in a scheme.

What happens when you redeem mutual funds? ›

Redemption is nothing but a process of withdrawing units from your mutual fund investments and getting the money back from your investment at the net asset value (NAV) prevailing on the redemption day. Let us understand more about this process as we proceed with the article.

What is a redemption payout? ›

In finance, redemption refers to the repayment of any fixed-income security at or before the asset's maturity date.

What is instant redemption mutual fund? ›

This facility ensures that investors will get money in their bank accounts within a few seconds of applying for redemption. But Parag Parikh Liquid Fund is nothing new; around 11 fund houses already offer this facility. Aditya Birla SunLife, DSP, HDFC, Franklin Templeton and Nippon India are some.

What is the 30 day rule on mutual funds? ›

To discourage excessive trading and protect the interests of long-term investors, mutual funds keep a close eye on shareholders who sell shares within 30 days of purchase – called round-trip trading – or try to time the market to profit from short-term changes in a fund's NAV.

How do I withdraw money from a mutual fund without tax? ›

So all you need to do is stay invested in a Debt Fund for 3 years or longer and the indexation benefit will be applicable to your redemptions. In the case of Equity Mutual funds, long-term capital gains (LTCG) are taxable only if your returns in a financial year exceed Rs. 1 lakh.

Is it better to sell mutual funds before or after distributions? ›

To minimize taxes in non-registered accounts, the best time to buy a mutual fund for most investors is immediately after the distribution, and the best time to sell is immediately before the distribution.

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