Redemption — Getting Your Money Out, Step by Step

Either an amount in rupees or a number of units. Requesting an amount is more common and more useful, since you usually know what you need rather than how many units that is.

Units are generally redeemed oldest first, which matters for both exit load and tax, as our page on exit load explains. For a long-running holding that works in your favour.

You can also redeem everything, which closes the holding in that scheme. The folio itself usually remains, so a later investment does not require setting up a new one.

The request is processed at the NAV of a business day, decided by whether it reached the fund before that day cut-off.

A request in before the cut-off on a business day gets that day NAV. After it, or on a holiday or weekend, it moves to the next business day. Our page on the cut-off time covers this in detail.

An important distinction: the applicable NAV and the date the money arrives are two separate things. People conflate them and then believe a redemption was delayed when it was simply settling normally.

A few working days for most categories, and a shorter cycle for schemes at the very short end of the debt ladder, which is part of why they suit money that may be needed quickly, as our page on liquid funds covers.

Weekends and holidays extend the calendar time without anything having gone wrong, so a request made before a long festival weekend takes longer in days than it does in business days.

Where several bank accounts are registered on a folio, the proceeds go to the one marked as default unless you specify another that is already registered. Adding an entirely new account is a separate request with its own verification, and it is not something that can be done as part of the redemption itself.

The money goes to the bank account registered on the folio and nowhere else. That is a safeguard rather than an inconvenience, and it is the reason a closed account is such a common blocker.

Two things, and neither is a surprise if you checked in advance.

Exit load, if the units being sold are within the scheme stated window. For a long-running SIP redeeming a modest amount this usually does not arise, since older units go first.

Tax, which depends on the scheme type and holding period. This is not deducted by the fund for a resident investor in the way it might be elsewhere, so it is your own obligation to account for. Our page on mutual fund taxation covers the structure, and your own position belongs with a tax adviser.

Our page on mutual fund charges puts both alongside the other costs so you can see the whole picture.

In our experience, almost always one of these, and none of them is the fund being slow.

• A closed bank account on the folio, usually one attached to a job somebody left.
• An old mobile number, so a verification code goes nowhere.
• A KYC status that no longer permits transacting, which our page on mutual fund KYC covers.
• A signature mismatch against one recorded years ago.
• Joint holding requiring all signatures, where one holder is unavailable.

Every one of these is fixable in advance and painful to discover when the money is needed this week.

Four situations where redemption works differently from the ordinary case.

A holding within a lock-in cannot be redeemed at all until it ends, which is different from a charge for leaving early. An ELSS scheme works that way, with each instalment locked from its own date.

A joint holding requiring all signatures needs every holder to sign, which is why the either or survivor mode is usually the more practical choice, as our page on the folio covers.

A minor folio cannot be redeemed by the guardian once the child turns eighteen until the status is changed to adult.

A segregated portion of a scheme that ran into credit difficulty is not redeemable on demand, as our page on credit risk funds explains.

Two questions worth asking, because a redemption is easy to make larger than it needed to be.

Do you need all of it? Partial redemption is available, and most needs are for an amount rather than for everything. The rest stays invested, which our page on when to sell argues for.

Is this the right holding to sell from? Redeeming from the stable side of the portfolio is usually better than selling equity, particularly in a poor month.

One more habit worth building: keep the confirmation. A redemption produces a statement showing the units sold, the NAV applied and anything deducted, and that document is what settles any later question about whether the amount was right. People discard it and then have nothing to check against when the credit looks smaller than expected.

And if what you actually want is a regular monthly amount rather than a one-off, a withdrawal instruction does that with more control, as our page on the systematic withdrawal plan describes. If a request of yours has stalled, chasing it is routine work here. Get in touch.