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HOW TO REDEEM FROM MUTUAL FUNDS?

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Manish Kothari
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Manish Kothari
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HOW TO REDEEM FROM MUTUAL FUNDS?

Let’s go back 7 years from today, when financial literacy was not at its peak and there were very few people who understood stock markets and investments. There were no mobile apps to facilitate your investments. 

In those days, there were random advisors and agents through whom we used to make our investments in mutual funds. They used to handle everything right from scheme to investing and keeping a track. In the present day, many of the investors who invested through these advisors or agents have no idea where their money has been invested, what was the scheme, what is the current position etc simply because they have no means to track the same. 

This is a widespread problem as the advisors and agents we trusted have either switched their jobs or are not in touch anymore. So what to do in such a situation? When we have no point of contact, no details and no resource to track our hard earned money which was invested years back? 

They might have built great wealth for you till now but how to claim that wealth? No need to worry because we at ZFunds are there to help investors. In this article, we will discuss various ways through which you can redeem that money invested in mutual funds. Let’s get started. Read till the end for a super awesome surprise for investors!

What is Mutual Fund Redemption? 

In the easiest language, mutual fund redemption stands out as the process whereby a person sells off or withdraws their units and gets the amount in their bank account. Besides, if any tax or exit load is applicable, the investors will have to pay these charges and tax on redeeming their units. 

The redemption can be done at any time if the fund is an open-ended mutual fund scheme. In contrast, if the fund comes out as close-ended, investors cannot sell off their units before the fixed maturity date. And if they want to redeem before maturity, it is possible through the stock exchange.

Now, let's get understand the methods of redeeming mutual funds- 

How to Withdraw your Mutual Funds?

Investors should always consider a few things before redeeming or exiting mutual funds. Withdrawing units from mutual funds is as easy as purchasing them. However, the process of selling off the units may differ if you redeem the units directly through AMC, Investment Platform, or an agent. Also, there are some charges and taxes applicable that unit sellers may be required to pay while selling off the units. Therefore, consider the below factors before taking the initiative to redeem your mutual fund’s units.

Things to keep in mind while redeeming mutual funds  

Before selling off the mutual funds units, you should go through the below factors mindfully. The below-listed characteristics will help you in making your redemption procedure easy. 

  • Lock-in Period: As discussed earlier, one can go for redemption at any point of time if the fund is an open-ended scheme except in the case of ELSS Funds which comes with a lock-in period of 3 years. In contrast, if the investment is in a close-ended fund, one can't redeem units before the maturity period. 
  • Exit Load: Investors will have to pay exit load only if they redeem their mutual fund units before the specified period. No exit load will be applicable if the redemption is done after the specified period. Besides, exit load varies from one scheme to another, and it could range from 0.25% to 2%. 
  • Taxation: Taxation aspect is also a very important factor to be considered while making a redemption. As different types of mutual funds have different taxability and it also depends upon the holding period of the investor.  

Tax Treatment

 Equity-OrientedDebt-Oriented
LTCG Tax Units sold after 1 year - 10% (above Rs. 1 Lakh)Units sold after 3 years - 20% after indexation
STCG TaxUnits sold within 1 year - 15% Units sold within 3 years - As per tax slab

What are the methods of redeeming mutual funds? 

You can go for redemption through any of the below-listed methods once you have made your decision to redeem your units. 

Through any Mutual Fund Distributor Platform: 

You can withdraw or redeem your mutual fund investments by taking help from any Mutual Fund Distributor or Platform. They will place your request in their back-end BSE server. For that, you will need to make an account by filling in the necessary details and sharing the previous investment details like the folio number, scheme name, etc.. Once you have shared investment details, you will get their assistance in redeeming mutual funds. The amount will be transferred within a few working days in your linked bank account after the redemption is processed. 

Through AMC’s Official Website: 

For redeeming your mutual fund investments, you can also do it by going to the AMCs’s Official Website. In that case, you will need to login to that AMC or Mutual Fund’s Account where your money was invested. Suppose you invested in a scheme of Nippon India Mutual Fund, in that case you will have to login to Nippon’s official website only. If you don’t have the login credentials, then you will need to register yourself by filling the required details. Once the account is open, you will be able to see all your holdings in that particular AMC. Then for redemption, simply select the scheme & amount you want to withdraw. This way, after the transaction has been placed, the money will be credited to your linked account.

Through Physical Request (AMC, RTAs):

Another method of redeeming mutual funds is a physical request. In an offline method, investors will be required to visit the specific AMC or RTA such as CAMS & KFintech (Karvy). Once you reach there, you will get the physical form to begin the withdrawal process. In the form, you will be asked to fill up the details like Folio number, scheme name, the amount you want to withdraw, etc. After submitting the form, the investor will get the amount via NEFT or through a cheque. Above all, the online mode is faster than the offline mode, and the redemption gets credited to the investor's account within 3 to 4 working days.

Through a Demat account- 

If you have invested in mutual funds through a Demat or trading account, in that case, you can withdraw your units only from the same account only. You can reach out to that Broker or Depository Participant and tell them to help you out with the redemption process. It can be done online as well as offline. In online mode, you just need to login into your broker account and go to your mutual fund holdings. Thereafter, you need to select the mutual fund scheme & the amount that you want to withdraw. 

Once the process is done, the redemption amount will be credited to your linked bank account via NEFT or IMPS. 

So these were the ways by which you can redeem your mutual funds. But what if I told you that there is a dedicated team which is there to support you. You just have to drop a whatsapp message and they will help you to get your mutual funds redeemed and take all the stress and hassle. 

No need to worry because we at ZFunds have taken this initiative to come forward and help investors. You can reach out to us by dropping a Whatsapp at 7217746224. And our experts and advisors will be there to give you one on one guidance and help you with each and every step.

Happy Investing!