What are SIP Withdrawal Charges in Mutual Funds?
Mutual fund withdrawal charges or exit loads are levied by the fund house to discourage investors from redeeming their investments too quickly. Scripbox does not have any withdrawal charges. However, at the time of withdrawal, depending on whether your investments are classified as short-term or long-term, you may incur exit loads (to the mutual fund company) or capital gains taxes.
Exit Load Charges in Mutual Fund
|Type of Investment||Exit Load|
|Equity *||1% of the sale proceeds if sold within 1 year of purchase *.|
|Debt *||Usually none.|
|Tax Saving||Not applicable as the equity investments cannot be sold before the 3 year lock-in period, there by exceeding 1 year.|
|US Equity||Usually none.|
* Investment type: Equity
Fund Name: Parag Parikh Long Term Equity Fund (Growth)
Exit load: 2% on or before 365 days OR 1% after 365 days but on or before 730 days.
* Exit loads on Liquid Funds as are follows:
|Investor exit upon subscription||Exit loads as a % of redemption proceeds|
(This is applicable for all investments made in liquid funds post October 19, 2019)
SIP Withdrawal Charges with Example
For SIP withdrawals, some mutual funds may impose exit loads if the investment is redeemed before a specified period. For instance, if you withdraw your SIP investment within a year from the date of investment, the mutual fund may charge an exit load ranging from 0.5% to 2% of the redemption amount.
In the case of investment through SIP, every instalment is treated as a fresh purchase. For example, you are investing an amount of INR 1,000 through monthly SIP in a fund that charges an exit load of 1% for a holding period of less than 1 year. If you withdraw the investment towards the end of 2 years, then investments made in the first 12 months will not attract an exit load. Investments made after 12 months will attract the 1% exit load.
|Month||Investment Amount||Exit Load as on April 2023|
|Jan-21||₹1,000||No Exit Load|
|Feb-21||₹1,000||No Exit Load|
|Mar-21||₹1,000||No Exit Load|
|Apr-21||₹1,000||No Exit Load|
|May-21||₹1,000||No Exit Load|
|Jun-21||₹1,000||No Exit Load|
|Jul-21||₹1,000||No Exit Load|
|Aug-21||₹1,000||No Exit Load|
|Sep-21||₹1,000||No Exit Load|
|Oct-21||₹1,000||No Exit Load|
|Nov-21||₹1,000||No Exit Load|
|Dec-21||₹1,000||No Exit Load|
|Jan-22||₹1,000||No Exit Load|
|Feb-22||₹1,000||No Exit Load|
|Mar-22||₹1,000||No Exit Load|
Recommended to Use Scripbox’s: SIP Calculator to find returns
Capital Gain Taxes
|Type of Investment||Holding Period to beclassified “Long Term”||Tax on Long-TermCapital Gains||Tax on Short-TermCapital Gains|
|Equity||1 year from purchase||10% capital gains tax on gains over Rs.1 Lakh||15% flat tax on the gain amount after exit load deduction + cess|
|Debt||3 years from purchase||20% tax after “indexation”: a process by which you can adjust your purchase cost upwards based on inflation||Tax based on your income tax bracket (10% or 20% or 30% + cess)|
|Tax Saving||3 year lock-in for these equity funds to be eligible for section 80C income tax deduction||10% capital gains tax on gains over Rs.1 Lakh||Not applicable as these investments cannot be sold before the 3 year lock-in period|
|US equity||3 years from purchase||20% tax after “indexation”: a process by which you can adjust your purchase cost upwards based on inflation||Tax based on your income tax bracket (10% or 20% or 30% + cess)|
Frequently Asked Question
Systematic Investment Plan (SIP) withdrawal charges in mutual funds refer to any fees or costs associated with redeeming or withdrawing your investment from the mutual fund through the SIP. It’s important to note that SIP withdrawal charges are not common in all mutual funds and may vary depending on the AMC and the specific fund you have invested in, such as tax saver or elss etc. The charges, if applicable, are typically disclosed in the fund’s offer document or Key Information Memorandum (KIM).
Some mutual funds impose an exit load on investors who redeem their units within a specified period after the purchase. The exit load is usually expressed as a percentage of the redemption amount or NAV. For example, if the exit load is 1% and you redeem Rs. 1,000 worth of units, you may incur a charge of Rs. 10. Read more about mutual fund exit load.