How to Redeem Mutual Funds?

Wondering how to redeem mutual funds or withdraw your investment smoothly? Whether you’re switching schemes, meeting urgent financial goals or simply rebalancing your portfolio — it’s important to understand how mutual fund redemption works. 

Knowing the right process and rules helps you encash the maximum amount without any hassle. This guide answers your top questions like redeem meaning in mutual fund, how to redeem mutual fund online, the timeline involved and what taxes may apply. 

What is Mutual Fund Redemption? 

Mutual fund redemption means selling your fund units to access your returns. Simply put, when you redeem your mutual fund, you’re withdrawing all or part of your investment at the current Net Asset Value (NAV). 

When you submit a redemption request, the AMC (Asset Management Company) processes your sale and the amount gets credited to your registered bank account after deducting any applicable exit load or taxes. 

The value you receive depends on the NAV of your fund on the day your request is processed. 

There are mainly three ways to redeem your mutual fund units: 

• Unit-based redemption: You redeem a specific number of units. 

• Amount-based redemption: You specify the amount you wish to withdraw. 

• Complete redemption: You withdraw your full investment amount. 

Reasons for Mutual Fund Redemption 

Here are some common reasons why investors choose to redeem their mutual fund investments: 

1. Underperforming or unsatisfactory schemes: 

If your fund is not meeting your expectations or performing below benchmark levels, it might be time to redeem and switch. 

2. Better investment opportunities: 

You may want to exit one fund and invest in another with higher potential or better alignment with your goals. 

3. Financial emergencies: 

Medical bills, education expenses, or urgent home repairs can require quick liquidity. Redeeming mutual funds is one way to access funds. 

4. Portfolio rebalancing: 

 You might redeem units to rebalance your portfolio if your asset allocation drifts away from your risk profile. 

5. Change in life stage or goals: 

 For example, as you near retirement, you may move from equity funds to more stable debt funds. 

6. Lacklustre AMC performance: 

 If your AMC or fund manager’s strategy doesn’t inspire confidence, you might prefer to withdraw. 

How Does Mutual Fund Redemption Work? 

Here’s how mutual fund redemption typically works step by step: 

1. You decide how many units or how much money you wish to redeem. 

2. You submit a redemption request to your AMC, distributor, or through your demat/trading account. 

3. The AMC processes the request based on the NAV applicable on that day. 

4. After deducting any exit load or taxes, the redeemed amount is credited to your registered bank account. 

5. You receive an SMS or email confirmation once the redemption is processed successfully. 

How to Redeem Mutual Funds? 

You can redeem your mutual funds in multiple convenient ways. Here’s how: 

1. Through your AMC (Asset Management Company): 

1. Visit the AMC’s website or branch. 

2. Log in using your credentials. 

3. Choose the scheme and number of units/amount you wish to redeem. 

4. Confirm your request and the redemption amount will be credited via NEFT or cheque. 

5. Tip: Opt for online redemption if you need funds faster. 

2. Through your demat or trading account: 

1. Log in to your broker or demat account. 

2. Select the mutual fund and redemption option. 

3. The amount is credited to your linked bank account once processed. 

3. Through a Registrar and Transfer Agent (RTA): 

1. RTAs like CAMS and KFintech (Karvy) allow online or offline redemptions. 

2. You can visit their branch or website and submit your redemption form. 

Is Mutual Fund Withdrawal Different from Selling Stocks? 

Yes, mutual fund redemption differs from selling stocks. When you sell stocks, the transaction happens instantly on the stock exchange. However, mutual fund redemption takes place through the AMC, not the exchange and your payout depend on the NAV of that day, not live market price. 

What are the Types of Redemption? 

You can choose from the following types based on your need: 

1. Unit-based redemption: Redeem a fixed number of units 

2. Amount-based redemption: Specify the amount you wish to withdraw 

3. Complete redemption: Redeem your entire holding 

Mutual Fund Redemption Process 

Follow these simple steps to redeem your mutual funds: 

1. Keep your folio number, PAN, and bank details handy 

2. Choose the method — AMC, demat account, or RTA 

3. Submit your redemption request before the NAV cut-off time 

4. Once processed, your amount is transferred to your bank account 

Mutual Fund Redemption Timeline 

The mutual fund redemption time varies depending on the type of fund: 

• Liquid funds: 1 working day after request submission 

• Debt funds: 2 to 3 working days 

• Equity funds: 3 to 4 working days 

• Average redemption time: 3 working days (except liquid funds) 

Before 3 PM NAV cut-off rule: 

If you place a redemption request before 3 PM on a working day, the same day’s NAV applies. Requests placed after 3 PM will be processed using the next working day’s NAV. 

Things to Remember 

Before redeeming your mutual fund investments, keep these points in mind: 

• Exit Load: Some funds charge a fee for early redemption. 

• Bank Updates: Ensure your bank account details are updated to avoid delays. 

• Holidays: Redemptions may be delayed on public or state-declared holidays. 

• Taxes: Redemptions may be subject to Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG) depending on the holding period and fund type. 

Can I Redeem Mutual Fund Anytime? 

If you’ve invested in open-ended funds, you can redeem your investment anytime. However, always check the exit load, NAV cut-off time and tax implications before placing the request. 

Instead of redeeming your investment early, you can get instant liquidity by applying for a Loan Against Mutual Funds from Fibe. You can access up to 80% of your NAV value, get up to ₹10 lakhs instantly and pay interest-only EMIs.  
Download the Fibe App to apply within 10 minutes and get your amount credited directly to your account. 

FAQs on Mutual Fund Redemption 

1. What is the redeem meaning in mutual fund? 

Redeeming mutual fund units means selling or withdrawing them to access your returns. 

2. When is the best time to redeem mutual funds? 

It depends on your financial goals and NAV levels. A higher NAV means higher returns. 

3. Is it possible to redeem a mutual fund after one year? 

Yes, most funds can be redeemed after a year, depending on the fund type. 

4. What are the new SEBI cut-off rules for redemption? 

For non-liquid funds, redemption requests before 3 PM get the same day’s NAV. For liquid funds, 2 PM is the cut-off time and requests before that get the previous day’s NAV. 

5. Can I redeem mutual fund anytime? 

Yes, open-ended funds allow you to redeem anytime, but always check the exit load and tax implications first.