Mutual funds have become a popular investment option in India because they offer flexibility, transparency, and easy liquidity. But just like investing, withdrawing money from a mutual fund also requires a proper understanding of the process. Many beginners often ask, “How to withdraw money from mutual funds?” This detailed guide explains the step-by-step procedure, important rules, tax implications, and smart tips to help you make the right decisions.
What Does Mutual Fund Withdrawal Mean?
Withdrawing money from a mutual fund means selling your units back to the fund house. The price at which you sell your units is known as NAV (Net Asset Value). Once you place a withdrawal request, the fund house processes it and transfers the money directly to your bank account.
Step 1: Choose Your Withdrawal Method
You can withdraw mutual fund units in two ways:
1. Through Online Platforms
Most investors today use apps and websites like:
- Groww
- Zerodha Coin
- Paytm Money
- ET Money
- AMC websites (SBI MF, HDFC MF, ICICI Pru MF, etc.)
Steps:
- Log in to your account
- Select the mutual fund scheme
- Click on “Redeem” or “Withdraw”
- Enter the amount or number of units
- Confirm the request
This is the fastest and most convenient method.
2. Through Offline Mode
If you want to withdraw manually:
- Visit the nearest branch of the fund house
- Fill out a Redemption Request Form
- Submit the form along with your signature
- The amount will be credited to your registered bank account
This method is slow but useful for investors who prefer paperwork.
Step 2: Choose Full or Partial Withdrawal
Mutual fund withdrawals come in two types:
Full Withdrawal
You sell all units and exit the scheme completely.
Partial Withdrawal
You redeem only a portion of your investment and keep the rest invested.
Partial withdrawal is suitable when you need money but still want your investment to grow.
Step 3: Understand Processing Time
The time taken to receive your money depends on the type of mutual fund:
- Equity Funds: 2–3 working days
- Debt Funds: 1–2 working days
- Liquid Funds: Same-day or next working day
Processing may take longer during bank holidays or market holidays.
Step 4: Check for Exit Load and Lock-in Period
Before withdrawing, check the following:
1. Exit Load
Some mutual funds charge a small fee if you withdraw before a certain period (usually 6–12 months).
Example: If a fund has a 1% exit load for withdrawals within 12 months, and you redeem ₹1,00,000, you will get ₹99,000.
2. Lock-in Period
Some funds do not allow early withdrawal:
- ELSS (Tax-saving funds): 3-year lock-in
- Certain close-ended funds: Redeemable only at maturity
Always check these rules to avoid unwanted charges.
Step 5: Know the Tax Implications
Withdrawal from mutual funds may attract capital gains tax.
Equity Mutual Funds
- Short-Term Capital Gains (STCG): 15% (if sold within 1 year)
- Long-Term Capital Gains (LTCG): 10% above ₹1 lakh in a year
Debt Mutual Funds
Taxed as per your income tax slab (regardless of holding period).
Understanding taxation helps you plan withdrawals smartly.
Step 6: Track Withdrawal Status
After submitting your redemption request, you will receive:
- SMS updates
- Email confirmation
- Notifications from your investment platform
You can also check:
- Fund house website
- Investment app dashboard
Usually, money is credited directly to your bank account registered with the mutual fund.
Step 7: Make a Smart Withdrawal Decision
Withdrawing money should be planned carefully. Here are some smart tips:
Withdraw Only When Necessary
Mutual funds work best when money stays invested for long periods.
Avoid Redeeming During Market Crash
If you withdraw during a fall, you may book unnecessary losses.
Use SWP (Systematic Withdrawal Plan)
For regular monthly income, an SWP allows you to withdraw a fixed amount each month. Ideal for retirees.
Match Withdrawals with Goals
If your financial goal has arrived (education, home down payment, etc.), withdrawal is justified.
Common Mistakes to Avoid
- Ignoring exit load and taxes
- Withdrawing fully instead of partial redemption
- Redeeming during market volatility
- Not updating bank details
- Panicking due to short-term market movement
Avoiding these mistakes ensures smooth financial planning.
Final Thoughts
Withdrawing money from mutual funds is a simple, hassle-free process, whether done online or offline. However, the decision to redeem should be taken thoughtfully after considering exit load, taxes, financial goals, and market conditions. Mutual funds are long-term wealth builders, and disciplined investing—with smart withdrawal planning—can help you achieve financial stability and future goals with confidence.