A decision to redeem (sell off) mutual funds should be a rational one. One should never jump to conclusions by looking at the NAV for a day. Anyways, once you have taken a decision to redeem your mutual funds, you need to follow a certain procedure. In this article, an effort has been made to make you aware about the requirements and the process to follow while choosing exit option for your mutual fund.
Process of redemption if mutual funds were purchased through AMC or Distributors
Getting mutual funds via AMC or distributor is the most common and simplest route. If this is the case, then you can redeem your mutual funds offline. You will have to fill and duly sign a mutual fund redemption form and send it either to the office of AMC or to the distributor’s office. You can get this form from their office. Redemption form normally asks for the information like your name, folio number, mutual fund plan/ scheme and the exact number of units you want to sell. Before submitting the form, please check the details again for correctness. Once the form is submitted, the proceeds from the transaction will be transferred to your registered bank account within 3-4 days. However, if you no longer operate your registered bank account, then you will be required to attach a cancelled signed cheque of your new account. In such case, it may take little extra time for the money to be credited to your new account.
Process of redemption of mutual funds were purchased online
Mutual funds that were purchased online can be disposed off online either by using a trading account or through AMCs website. Once you log in, you will have to select the fund you wish to sell and need to key in the exact number of units to be redeemed. Check the information again and confirm your action.
You can also make redemption through Karvy, Computer Age Management Services Private Limited (CAMS), etc. by visiting any of their branches. The advantage of getting redemption done from there is, you can redeem units of more than one mutual fund at the same time. However, please a note of this that these organizations do not deal with all mutual funds.
Additional points you must look for your benefit while redeeming
- NAV applicable for your transaction – If you have submitted your request for redemption before 3 pm, then the NAV at the close of the day will be applicable. However, any application submitted after 3 pm will be transacted at the closing value of NAV for the next day.
- Lock-in period – Open ended funds can be redeemed at any point. The problem is with close ended funds with lock-in period. Practically, you cannot redeem your close ended mutual fund before the end of lock-in period. For Equity Linked Savings Scheme (ELSS), lock-in period is 3 years, counted from the date of investment.
- Exit loads and taxes at the time of redemption – Before you reach out to AMCs office or try to sell your fund online, check the provisions related to the exit loads and taxes. Taxes and exit loads are dependent on the duration for which you have held your funds.
Be aware of the various categories of mutual funds and their workings. Before implementing your decision of investing or redeeming any mutual fund, check for the NAV and other relevant information. You can also seek guidance from financial advisors.
