As a retail investor, you must have come across a barrage of ways that help you buy mutual fund units. The fund houses and brokers often urge investors to buy units of a particular scheme in view of their past returns and also the future potential.
To be able to earn gains, it is vital to first sell the units at premium — without which any gains made are mere notional.
In order to earn the gains, investors need to first sell the mutual fund units at a premium. Here we explain how can investors redeem their mutual fund units.
Why to redeem?
Redemption of mutual fund units by an investor means withdrawal of investment. It is usually done for a number of reasons. The investor may want to go for redemption when the investor is in need of funds, or when the investment objective has been fulfilled, or when they want to change the allocation. Redemption also ensues when the mutual fund scheme is not able to meet the investors’ expectations.
These are the steps to follow:
1. If units were bought using a trading or demat account, redemption should also be done using the same by calling the broker with whom the investor has the trading and demat account. If the investor has invested via a distributor or advisor, they can facilitate the redemption.
2. To redeem the fund units online, you have to log-on to the ‘Online Transaction’ page of the desired Fund house.
3. Then you can log-in using your folio number and/or the PAN. Later, you can select the scheme and the number of units (or amount) you want to redeem. After entering all these details, investor needs to confirm the same.
4. If possible, investors can decide to redeem only the gain while keeping the principal amount invested. Alternatively, they can redeem only the portion of the units which qualify for LTCG to keep the tax outgo on the lower side. Tax on long term capital gains is eligible for indexation benefits.
5. In addition to this, investors can also use the services of central service providers such as CAMS (Computer Age Management Services) and Karvy which offer the option of redeeming mutual fund purchased from several AMCs.
For this, you need to download the form online, or visit the nearest office. However, one must ensure that these agencies may not service all the fund houses.
6. To redeem funds through offline mode, the unit holder needs to submit a duly signed redemption request form to the AMC or the Registrar’s designated office. In the redemption form, one needs to enter all the details such as name, folio number, name of the scheme and number of units to be redeemed.
In addition, redemption form needs to be signed by all the unit holders. The redemption proceeds will be credited to the registered bank account.
It is important to note that exit load may be levied at the time of redemption in case the mutual fund is redeemed within a short period of time particularly in equity funds.
Hence, one should consult a mutual fund adviser or tax adviser to know the tax implication of redemption of units.
It usually takes anywhere between one to three working days to get the money in the bank. In case of liquid or money market or overnight funds, investors stand to get the money inn their bank account within one working day after the redemption. And in case of other funds, it usually takes three working days to receive the money.