Mutual Fund Redemption

With so many funds out there, it turns to be a tedious job for an investor to decide which mutual fund(s) to choose. The game is not yet over, another difficult decision is to track the performance and figure out when and how to sell-off units. Not to forget, the fund manager invests money in an array of assets – debt securities, money market instruments, and equities. The main aim is to deliver the highest possible returns to the investors. Although, different mutual funds have different guidelines and rules for entering, exiting and redemption. As an investor, you need to be careful of this when you want to exit from a mutual fund.

When To Exit and Redeem Funds


That ‘right time’ to sell or doing redemption in mutual fund depends on the financial goals of the investor. There are some who must be invested in a mutual fund for good 15-20 years with the purpose of purchasing a home or financing the education for their child or it can be the wedding. If not long-term, then short-term goals like buying an appliance or a car. If the investor is getting close to her goals, time to sell off the fund irrespective of the market stage. Another mutual fund redemption case can be when a fund performs consistently for more than 2 years and drops down in its accredited ratings.


Reasons to Redeem Mutual Fund


An investor has many reasons to sell or invest fund units, regardless of what the market situation occurs. Before mutual fund redemption you should consider the following aspects before redeeming:

  1. If AMC fails to deliver what it promised, and your financial goal is not an ascending the staircase. Time for redemption in the mutual fund.
  2. When the market is HIGH, don’t rush in selling’em off. Investor(s) should have trust in the ability of the fund manager whilst booking profits and logging-off losses. Hence, redeeming too soon with the hit in the market is not a good strategy.
  3. If your selected scheme is not doing well or the performance is going downstream, don’t give it up. But, if the reason falls for something like a change of the portfolio mix or fund manager, then you can consider mutual fund redemption. The final call is yours!

What are The Methods of Mutual Funds Redemptions?


There are various methods of Mutual Fund redemption. Let’s look at some of the ways:

  • A trading account or demat account.

An investor generally tends to buy mutual fund through trading or demat account. In case, if you have bought funds through a demat account, then it’s quite easy to make the redemption through it. After completing the trading process, they make an electronic payment against the redemption request. In that way, you will get the due amount credited to your account.

  • Through the Asset Management Company.

If in case an investor has brought the fund through the AMC, then he/she can sell it either through the online or offline. In case of online, He/she can sell it through the online portal. One can choose to sell either the full unit or the partial one. In case of offline, the investor needs to visit the respective AMC office to do the redemption. After an investor process the redemption request, then he/she will receive the redemption via NEFT or through cheque at their respective address. But in case of online, redemption will be done quickly, and the investor will get the due amount directly into their account.

  • Through Agent and Distributor.

An investor redeeming through an agent and distributor is quite normal. If an investor has purchased through an intermediary, then she may sell out through the same entity. An investor needs to fill up the redemption form, with the number of units to be redeemed.  They will receive the money either through NEFT or through Check at their registered address.

  • Register and transfer agency:

An investor also has an option to redeem the mutual fund through a third party or through the register. There are few central offices like CAMS and Karvy which offers the option of redeeming the mutual fund bought from several AMC’s. Make sure to download the Mutual Fund redemption form and duly signed and filled in nearest CAMS office.

What are The Different Types of Taxes on Mutual Fund Redemption?


A Mutual fund investor makes gains by way of capital appreciation and dividend recipient of their mutual fund investment.  In case if the investor makes any capital gains or profit, then they must pay a certain amount of tax on their gains known as Capital Gain tax.  Capital gains is basically the difference between purchase value and the sell value. Mutual fund taxation will only apply to this gain, if you sell your units in the fund. In a mutual fund, a differential rate of taxation is applied across various fund categories. The tax rate depends upon on the type of mutual fund and mutual fund redemption time frame (also known as Holding period). The redemption period can be short term and long term.

In the case of equity mutual fund, the redemption period of more than one year is considered as long term and holding period up to one year is considered as short term. But for debt funds, the time frame up to 36 months is referred as short term and more than 36 months are termed as long term.  The tax levied in the short terms are known as short term tax gain and the tax levied on the long term is known as long term tax gain). The short-term capital gains on redemption of equity funds is taxable at the rate of 15%, while the ltcg tax rate on equity fund up to RS.1 lakh is tax free.  While redemption above Rs one lakh is taxable at the rate of 10%.

Apart from that mutual fund also charge Securities Transaction Tax on equity funds on equity and hybrid equity fund, when an investor redeems a mutual fund. The best part is the investor doesn’t have to pay it separately.

How to Redeem Mutual Funds with Gulaq


You can easily figure out mutual fund redemption on Gulaq without any fuss. All you need to do is:

  1.  Log-in to your Gulaq account; hop on to your portfolio and select the fund you wish to redeem/ units to sell.
  2. Once you select, the request will be sent to the AMC with an automated mutual fund redemption form.
  3. You will be updated accordingly.

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Attention Investor
Investments in Mutual fund & Securities Market are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund or designing a portfolio that suits your needs. Terms and conditions of the website are applicable.

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Estee Advisors Pvt Limited (hereinafter referred to as “EAPL”) is registered with the Securities and Exchange Board of India as Stock Broker with registration number INZ000170130 and registered with BSE Star with code 24408 for mutual fund transaction facility. EFSPL and EAPL are group companies and EAPL is authorized to provide its services to the Users on the Gulaq website/app under a Sub-distribution agreement with EFSPL.

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Mutual fund investments are subject to market risks, read all scheme documents carefully.

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