How Do I Get My Money Back from Mutual Funds - Expert Guide

"I need money urgently. How fast can I get it out of my mutual fund?"

This question shows up in our Belong WhatsApp community more often than you'd expect.

Usually from NRIs who assumed their money was locked away for years, only to discover that most mutual funds allow withdrawal anytime.

The good news: getting your money back from a mutual fund is straightforward. After submitting a redemption request, the proceeds are typically credited to your registered bank account within 1-3 working days.

This guide covers the exact process, costs involved, and NRI-specific considerations for withdrawing your mutual fund investment.

What Is Mutual Fund Redemption?

Mutual fund redemption is the process of selling your units back to the fund house in exchange for cash.

The amount you receive depends on the Net Asset Value (NAV) on the day of redemption multiplied by the number of units you sell.

Unlike stocks, you don't sell mutual funds in the open market. Instead, you submit a redemption request to the Asset Management Company (AMC), and they buy back your units at the current NAV.

Example: You hold 5,000 units with NAV of ₹50. If you redeem all units, you receive ₹2,50,000 (before any exit load or tax).

Explore your investment options through our mutual funds tool.

How Long Does It Take to Get Money?

Processing time varies by fund type:

"T" refers to the trading day you submit the redemption request. Most open-ended mutual funds in India offer redemption on a T+1 or T+2 basis.

👉 Tip: If you need money urgently, liquid and overnight funds process redemptions fastest. Keep your emergency fund in these categories.

The 3 PM Cut-Off Rule

Timing matters for your redemption value. The transaction must be completed by 3:00 PM IST to receive the same day's NAV.

Before 3 PM: You get that day's NAV for calculation.

After 3 PM: You get the next business day's NAV.

This means if markets rise after you submit your request but before 3 PM, you benefit from the higher NAV. Conversely, a market drop works against you.

Step-by-Step: How to Redeem Your Mutual Fund

No matter where you've invested, the steps are usually similar:

Step 1: Log into your mutual fund account or investment platform.

Step 2: Select the scheme you want to withdraw from.

Step 3: Choose redemption type: full, partial, or specify units/amount.

Step 4: Confirm your registered bank account details.

Step 5: Submit the request.

The amount gets credited based on the applicable NAV and standard processing timelines.

Different Ways to Redeem

Your redemption method depends on how you originally invested:

Through Investment Platforms: If you bought through apps like Groww, Zerodha, or Paytm Money, redeem directly through the same platform. The amount credits to your linked bank account.

Directly with AMC: If you invested directly with the fund house, log into their online portal. Most AMCs provide both online and offline redemption options.

Through Registrars (RTA): RTAs like CAMS and KFin Technologies maintain investor records for multiple fund houses. You can redeem through their portals regardless of which AMC manages your fund.

Via Demat Account: If you purchased through a broker using your demat account, submit a sell order with the same broker.

Compare options using our NRI FD rates tool to see how different investments stack up.

Types of Redemption

You have flexibility in how much you withdraw:

Partial Redemption: Withdraw only what you need. Specify either the number of units or the rupee amount. Your remaining units stay invested and continue to grow.

Full Redemption (Redeem All): Exit the scheme completely. Your entire investment converts to cash, and your association with that fund ends.

Systematic Withdrawal Plan (SWP): Set up automatic regular withdrawals instead of one-time redemption. Ideal for generating steady income during retirement or covering monthly expenses.

👉 Tip: If you need regular income, consider setting up an SWP instead of redeeming everything. This way, your remaining investment continues to earn returns.

Learn more about withdrawal strategies in our guide on mutual funds for retirement income.

Exit Load: The Early Withdrawal Fee

Exit load is a fee charged by mutual funds when you redeem units before a specified holding period. It discourages frequent withdrawals and encourages long-term investment.

Typical exit loads:

Example: You invest ₹1 lakh in an equity fund. After 8 months, you redeem. The exit load of 1% means you receive ₹99,000 (assuming NAV stayed flat).

Most equity funds impose a minimum holding period of around a year. Debt funds exhibit varying durations, especially short and ultra-short variants.

👉 Tip: Before investing, always check the exit load structure in the scheme documents. Some funds have nil exit load even from day one.

Lock-In Periods: When You Can't Withdraw

Some mutual funds have mandatory lock-in periods during which redemption is not allowed:

ELSS (Tax-Saving Funds): 3-year lock-in from date of each investment. For SIPs, each installment has its own 3-year lock-in. At the end of 4 years of SIP, you can only withdraw the first 12 installments.

Solution-Oriented Funds: Retirement and children's funds may have 5-year lock-in or until the child turns 18.

Close-Ended Funds: These have a fixed maturity period and may only allow redemption at specific intervals or at maturity.

After the lock-in ends, you can redeem freely with no restrictions.

Understand ELSS better in our guide on tax-saving mutual funds.

Tax Impact When You Redeem

Redemption triggers capital gains tax. The rate depends on fund type and holding period.

Equity Funds:

• Held ≤12 months: 20% STCG

• Held >12 months: 12.5% LTCG (₹1.25 lakh annual exemption)

Debt Funds (purchased after April 2023):

• Any holding period: Taxed at your income slab rate

Example: You invested ₹5 lakh in an equity fund. After 18 months, it's worth ₹7 lakh. Your LTCG is ₹2 lakh. Tax = 12.5% on (₹2 lakh - ₹1.25 lakh) = ₹9,375.

For NRIs, TDS is deducted at source. You may claim refund when filing ITR if excess tax was deducted.

Understand the full picture in our guide on mutual fund taxation.

NRI-Specific Redemption Process

For NRIs, a few additional steps apply:

Bank Account Requirement: Redemption proceeds credit only to your registered NRE or NRO account in India. Ensure your bank details are updated with the fund house.

Repatriation: Proceeds from NRE-linked investments are fully repatriable. NRO-linked proceeds have repatriation limits (USD 1 million per financial year after tax clearance).

TDS Deduction: AMCs deduct TDS before crediting your account. Equity LTCG attracts 12.5% TDS, STCG attracts 20%. Debt funds face higher TDS at applicable slab rates.

DTAA Benefits: If you're a UAE resident, you pay tax only in India since UAE has no personal income tax. The India-UAE DTAA prevents double taxation.

👉 Tip: Keep your KYC updated with current overseas address and NRE/NRO account details. Outdated records can delay redemption processing.

Learn more about repatriating mutual fund proceeds and DTAA benefits for NRIs.

Common Redemption Mistakes to Avoid

Redeeming During Market Lows: Panic selling during corrections locks in losses. If your fund fundamentals are strong, staying invested usually pays off.

Ignoring Exit Load: Redeeming one day before the exit load period ends costs you 1%. Wait a few days if possible.

Forgetting Tax Impact: A large redemption in a single year can push you into a higher tax bracket. Consider spreading redemptions across financial years.

Not Updating Bank Details: Outdated bank account information can delay your money by weeks.

SIP Lock-In Confusion: Each SIP installment has its own holding period. Early installments may be exit-load-free while recent ones aren't.

When Should You Actually Redeem?

Legitimate reasons to withdraw:

Goal Achievement: You saved for a house down payment or child's education. The goal is reached. Time to redeem.

Financial Emergency: Unexpected medical bills or job loss. Your mutual fund is your accessible reserve.

Fund Underperformance: Consistent 3-4 year underperformance versus peers and benchmark. Consider switching.

Portfolio Rebalancing: Your equity allocation has grown beyond comfort level. Redeem some to restore balance.

Life Stage Change: Approaching retirement? Shift from equity to more stable options.

When NOT to redeem: Short-term market volatility, chasing past performance of another fund, or minor underperformance.

Explore allocation strategies through our GIFT City mutual funds tool and track markets with Gift Nifty.

Alternative: Loan Against Mutual Funds

Need money but don't want to redeem? Consider a loan against mutual fund units instead.

Banks and NBFCs offer loans at 9-12% interest against your mutual fund holdings. Your units remain invested and continue earning returns. Once you repay the loan, your portfolio stays intact.

This works well when you need short-term liquidity but expect your funds to grow more than the loan interest cost.

Documents Required for Redemption

For online redemption, usually no documents are needed beyond logging in. For offline or large redemptions, you may need:

• Redemption request form (available on AMC website)

• PAN card copy

• Cancelled cheque or bank statement

• KYC documents if details have changed

Joint account holders may both need to sign the redemption form.

Tracking Your Redemption Status

Most platforms show real-time redemption status. You can also:

• Check your registered email for confirmation

• Log into CAMS or KFintech portals for transaction history

• Contact AMC customer service with your folio number

The status typically moves from "Submitted" to "Processed" to "Credited" within the standard timelines.

GIFT City Alternative for NRIs

For NRIs seeking hassle-free access to their investments, GIFT City investments offer an alternative.

GIFT City mutual funds and FDs operate under international financial services regulations with potentially easier repatriation processes.

Explore options through our GIFT City Alternative Investment Funds tool.

Key Takeaways

Getting money back from a mutual fund is straightforward. Submit a redemption request, and proceeds typically credit within 1-3 business days. The 3 PM cut-off determines which day's NAV applies.

Exit loads apply if you redeem before the specified holding period, typically 1% within 12 months for equity funds. ELSS has a mandatory 3-year lock-in with no early exit option.

Tax is triggered on redemption based on fund type and holding period.

For NRIs, ensure your NRE/NRO account details are updated. TDS is deducted at source, but DTAA benefits prevent double taxation for UAE residents.

Many NRIs in our WhatsApp community discuss redemption timing and tax optimization strategies daily. Join them for practical insights on managing your Indian investments.

Ready to invest with easy redemption options? The Belong app helps you explore mutual fund options, compare NRI FD rates, and manage your India investments seamlessly.