EN
Investing consistently in a mutual fund via a Systematic Investment Plan (SIP) can help you create wealth in the long run. However, in case of emergencies, you may need to access the money. You can do this by withdrawing from your investments.
However, you need to be aware of how to withdraw it. The process is simple, and you can easily submit a request with your broker. Continue reading to find out all about things you need to know when submitting a redemption request.
Key Takeaways
-
SIP investments can be withdrawn in part or in full, depending on the fund conditions.
-
SIP withdrawals can be done via a variety of permitted channels, both online and offline.
-
The exit load plus associated taxes vary depending on the fund type and holding duration.
-
The redemption funds are credited straight to the registered bank account.
A Quick Overview of SIP in Mutual Funds
A Systematic Investment Plan allows investors to make a fixed amount of recurring investments in a mutual fund. It allows investors to invest systematically without timing the market. Each SIP installment purchases units depending on the current NAV. Investors frequently utilise SIP in mutual funds to develop long-term wealth while distributing market risk through regular investments rather than lump-sum payments.
What Are the Different Ways to Withdraw SIP Amount?
The process of withdrawing your mutual fund SIP investments is simple and shouldn’t take too long. There are multiple ways to place a redemption request. Here is a quick overview:
Through a Broker or Distributor
If the SIP was invested in a regular plan, the withdrawal request must be made through the same broker or distributor. Investors must provide the folio number, scheme name, and number of units to be redeemed.
The intermediary verifies the request and forwards it to the Asset Management Company (AMC). After processing, the redemption amount is credited to the registered bank account within the AMC’s standard settlement timeline.
Using Your Trading and Demat Account
SIP units stored in demat form can be redeemed straight from a trading account or a demat account. Investors must log in, choose a mutual fund scheme, enter the quantity of units they want to redeem, and submit their request online.
The AMC will then perform the redemption at the appropriate Net Asset Value (NAV), and the funds are credited to the connected bank account once verified.
Through the Asset Management Company
Investors can submit SIP withdrawal requests directly to the AMC that manages the fund. Most AMCs offer online access to registered investors, although offline submissions may require a signed redemption form. Once the AMC has verified the request, the redemption amount is credited to the investor's registered bank account.
Through the Registrar and Transfer Agent (RTA)
Registrar and Transfer Agent (RTA) manages investor records and mutual fund transactions on behalf of the AMCs. SIP withdrawals can be made using the RTA's online portal or by completing an offline redemption form. Following verification, the RTA processes the request and sends it to the AMC for payment.
SIP Withdrawal Process
The SIP withdrawal process requires selecting a mutual fund scheme, filing a redemption request for the required number of units, and completing verification with the relevant intermediary. The AMC processes the request based on the applicable NAV. The redemption amount, after subtracting the exit load and any relevant taxes, is credited to the registered bank account.
Factors To Consider While Submitting a Mutual Fund Redemption Request
Now that you know how to withdraw money from a mutual fund SIP investment, let’s look at a few key factors you need to consider when submitting a redemption request.
-
Lock-in Period: Certain types of mutual funds, like the Equity-Linked Savings Scheme (ELSS), have a mandatory lock-in period of 3 years. During this time, you cannot withdraw or redeem your fund units. However, once the lock-in expires, you’re free to liquidate all of your holdings.
-
Exit Load: Some mutual funds levy a charge known as an exit load when you place a redemption request. The exit load is primarily levied to discourage you from redeeming your investments and is expressed as a percentage of the redemption amount. The percentage of exit load varies from one fund to another and can range anywhere from 0.5% to 2% of the redemption amount.
-
Holding Period: The gains from a mutual fund investment are classified into either Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG), depending on how long you hold the units. If the holding period is less than 12 months, the gains are classified as STCG, and if the holding period is more than 12 months, the gains are classified as LTCG. The rate of tax applicable on the gains varies based on whether the gains are classified as STCG or LTCG. STCG is taxed at 20% and LTCG, above ₹1.25 lakh, is taxed at 12.5%, without indexation.
Also Read, What are Short Term Capital Gains on Mutual Funds?
Conclusion
Although mutual fund investments can be used to meet your fund requirements, it is advisable to refrain from redeeming them unless it is an emergency. Frequently redeeming your investments can quickly derail your progress and may even make it tougher to meet your financial goals.
|
Mutual Funds Calculator |
|
