How to redeem your mutual fund investments

Mutual fund redemption means withdrawal of the investment by the investor. Redemption is usually made when the investor needs funds, or when the investment objective is met, or when the review of the financial plan requires a change in allocation, or when the program is not in able to deliver the desired results.

Ways to redeem

Investors can redeem in part by specifying an amount or the entire corpus by choosing the “All shares” option. Investors can also choose to redeem only the gain and keep the capital invested, or only the portion of the units that qualifies for the LTCG to minimize the tax impact.

How to redeem?

If the shares were purchased using a trading or demat account, the redemption can be made using it – by calling the broker or placing redemption requests using the online platform. If the investment was made directly, one can complete a redemption form, downloaded from the MF website and submit it to the AMC or RTA office. Alternatively, if one uses the MF web interface, the same can be used to redeem. If the investor has invested through a distributor or adviser, they can facilitate the redemption.

Redemption processing

If the investor has submitted the redemption within the cut-off time (usually 1:30 p.m. for liquid funds and 3:00 p.m. for other funds), the day’s NAV is applied after adjusting the exit charge, if any, at the redemption. In the case of liquid/money market funds, the investor obtains the credit within one business day. In other cases, it takes +3 business days to receive product credit.

Point to note

  • Exit charges are charges that may be levied at the time of redemption if the mutual fund is redeemed within a lesser holding period, particularly in equity funds.
  • The mutual fund’s adviser or tax adviser should be consulted as to the applicable tax consequences on the redemption of investments.

Content on this page is courtesy of the Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.