Mutual funds are preferred by many investors as money comes back quickly into their bank accounts when units are redeemed.
Let's understand how you can redeem your mutual fund units.
What is the procedure for redemption of mutual fund units?
If you wish to redeem units of a mutual fund scheme, you may do so on any business day. To do it physically, you need to fill in a transaction slip, which you can download from the fund house website or detach from the end of your account statement.
The redemption application can be submitted at any of the fund house official points of acceptance of transactions, across the country.
Many fund houses also allow online redemption through their websites. If you have invested through an online portal, you could use their online facility as well.
What is the amount that I can get when I redeem my mutual fund units?
It is easy to calculate the approximate value of your investments. It can be done by multiplying the number of units you hold on the day with that day's NAV of that particular scheme. However the same could be subject to:
i) Exit load, if any, of the scheme.
ii) 'Applicable NAV' i.e., the NAV that depends on the day and time when that you submit your redemption request. For example, if you submit your redemption before the cut-off time on a business day as defined in the scheme information document, you are entitled to the NAV of the same day.
iii) Securities Transaction Tax (STT) as applicable to equity-oriented schemes.
In what time do I get my redemption amount?
Redemption proceeds for liquid or debt-oriented units are paid within one-two working days. For equity mutual funds; the amount is paid back to investors within 4-5 working days.
What load or charges will the investor have to pay on redemption of units?
Generally most equity-oriented mutual fund schemes have an exit load of 1 per cent if redeemed before a year from purchase. There are some schemes, such as liquid or ultra short-term funds, which do not have an exit load.
So, if you hold an equity mutual fund and you wish to redeem before a year, an exit load will be deducted from the NAV which is applied for your redemption per unit.
How will I receive my redemption proceeds?
The redemption proceeds are paid to the investor’s bank account provided the investor has provided the bank's IFSC code and the bank and branch is enabled for RTGS NEFT. If the fund house does not have complete bank details, cheques are sent to the investor.