How to Withdraw Money from Mutual Funds?

You can withdraw money from mutual funds by placing a redemption request through the AMC, investment platform, or RTA servicing your fund. Open-ended funds generally allow redemptions on all business days, while lock-ins may restrict withdrawals from certain schemes like ELSS funds, Children’s Fund, Retirement Fund. Mutual fund withdrawal NAV, exit load, and taxes can vary depending on the scheme in question.

When you’re getting close to a financial goal or need money for an unexpected expense, your mutual fund investments may provide access to the funds you need. But before placing a redemption request, it’s important to understand how to withdraw money from mutual funds, how long it may take, and what charges or taxes may apply. This guide outlines all this in detail.

Here’s how to withdraw money from mutual funds:

1. Through the AMC Website

If you’ve invested directly through the AMC, you can place the withdrawal request on the AMC’s website/app. Just visit the AMC’s website, enter your PAN, and place the redemption request. You can also submit an offline request by visiting the nearest AMC branch office.

2. Through a Broker/Online Platform

If you had invested in MFs through a SEBI-registered broker or online platform, you can redeem the investment by logging into the broker’s platform/online app. The broker/online platform will forward your withdrawal request to the AMC.

3. Through Registrar & Transfer Agents (RTAs)

You can also redeem mutual fund units through Registrar and Transfer Agents (RTAs) such as CAMS and KFintech. RTAs maintain transaction and investor records and process redemption requests on behalf of the mutual fund houses they service.

Redemption requests can generally be submitted online through the RTA’s platform or offline at its service centres. However, you can use an RTA only for mutual fund schemes serviced by that RTA.

Depending on which redemption option you choose, the exact steps on how to withdraw money from mutual funds may vary slightly. That said, most online methods include the following steps:

• Step 1: Go to the AMC/investment platform website/app.
• Step 2: Log in using your credentials/PAN/folio number and OTP code.
• Step 3: Select the scheme you wish to withdraw from and click ‘Redeem’.
• Step 4: Choose between partial/complete redemption.
• Step 5: Enter the exact withdrawal amount/number of units you wish to redeem.
• Step 6: Confirm your transaction with the OTP sent to your mobile number.

After your withdrawal request is submitted, the investment corpus will be credited to your linked bank account. This account will also be listed on the redemption form, so remember to cross-check it before submitting the request to avoid issues later. 

How to withdraw mutual fund amount is pretty simple. But when doing so, don’t forget to concentrate on the following factors:

• Type of Scheme

Firstly, mutual fund withdrawals are allowed on all business days for open-ended schemes. Closed-ended schemes, however, do not allow withdrawals before the scheme’s tenure ends. You may be able to sell closed-ended scheme units on recognised stock exchanges if they’re listed. 

• Lock-In Period

Mutual fund withdrawals can be restricted by lock-in periods. For instance, ELSS funds have a 3-year lock-in period. For ELSS funds, you have to wait for at least 3 years from the date of investment to withdraw. Plus, this lock-in applies to each SIP separately.  Further, Children’s Fund and Retirement Fund have their specific lock in period which can be seen from their scheme information documents (SID).

• Exit Load

Some mutual fund schemes may charge investors a fee if they decide to withdraw before a specific period (as specified in the respective SIDs). This fee is called the exit load, and it’s calculated on the basis of the redemption NAV. Exit load application can directly reduce returns. That’s why it may be wise to wait until this minimum period ends before withdrawing from the scheme.

• Mutual Fund Withdrawal Time

The time taken for your withdrawal request to be processed depends on the type of scheme you’re withdrawing from:

• Liquid funds: T+1 working days *
• Debt funds: T+2 working days * 
• Equity funds: T+3 working days *

*These are indicative timelines. Please read the SID carefully for specific redemption timelines of your schemes. SEBI has specified that the transfer of redemption or repurchase proceeds to the unitholders shall be made within 3 working days from the date of redemption or repurchase subject to other terms & conditions and exceptional circumstances as specified by SEBI from time to time.

• NAV Cut-Off Time

Knowing how to withdraw money from mutual funds isn’t enough. You should also know that when you place the withdrawal request has a bearing on the NAV applied to the redemption. 

As per SEBI, e.g. for all schemes and plans other than Liquid and Overnight Fund Schemes and their plans if application is received any time on a non-business day or any time after 3:00 p.m. on a business day, closing NAV of the next business day applies. For Liquid and Overnight Fund Schemes, the NAV applicability provisions is different. You can refer the same in the respective SIDs.  Keep these mutual fund withdrawal time rules in mind before placing your request. 

• Capital Gains Tax

When you redeem units, your gains are subject to capital gains tax based on the type of scheme and when you choose to redeem:

1. Equity funds - 

• LTCG: If you sell your equity-oriented MF units after 12 months from the date of investment, gains will be taxed at 12.5% above Rs. 1.25 lakhs/financial year. 
• STCG: If you sell units before 12 months from the date of purchase, gains will be taxed at 20%.

2. Debt funds - 

Always taxed at slab rates regardless of the holding period if units are bought after.

Since LTCG rates for equity-oriented schemes are lower than STCG, it may make sense to hold the units until they become long-term.

Learning how to withdraw your mutual fund amount is important, especially since it can come in handy when your target amount is achieved or you need money for emergency expenses. The process is simple and usually involves:

• Logging into the investment platform AMC website/app.
• Selecting the scheme.
• Finalising the amount/units to be withdrawn.
• Authenticating the action.

But before you proceed, it’s important to consider certain factors like lock-in period, exit loads, mutual fund withdrawal timings and NAV, and capital gains tax. 

1. Can I withdraw money from mutual funds at any time?

Yes, you can withdraw from open-ended MF schemes at any time on any business day. However, for certain categories of schemes as specified above, you cannot withdraw until the lock-in period is over. Closed-ended funds also don’t allow redemption until they reach maturity.

2. When should I withdraw from a mutual fund scheme?

When you choose to withdraw depends entirely on your personal goals and needs. Here are some general scenarios when withdrawing may make sense:

• When you’ve achieved the linked goal.
• When you’re rebalancing your portfolio.
• When the scheme is consistently underperforming peers.
• When you need cash to meet an urgent financial emergency (avoidable with an emergency fund).

3. What is the cut-off time for mutual fund withdrawals?

As per SEBI, for placing redemption / withdrawal request, the cut-off time for most open-ended mutual fund schemes (including liquid and overnight fund) is 3:00 PM on a business day. Cut-off time for overnight funds is 7:00 PM in case where application is received through online mode.

4. Can I withdraw liquid funds immediately?

This facility is only for resident individual investors. If your AMC offers the Instant Access Facility (IAF) for liquid and overnight fund, you can withdraw up to Rs. 50,000 or 90% of the investment amount per day/scheme (whichever is lower) immediately. The amount gets credited through IMPS on the same day.

Disclaimer: The content presented in this blog is limited in scope and is intended to provide only a basic understanding of the topic. Further, this blog is intended solely for informational and educational purposes. Readers are advised to refer to the relevant Scheme Information Documents (SID), Key Information Memorandum (KIM), Statement of Additional Information (SAI), SEBI (Mutual Funds) Regulations, 1996, and circulars/guidelines issued by SEBI from time to time for comprehensive and updated information.

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