Mutual Fund Redemption – How to Redeem your Mutual Fund Units?

byDilip PrasadLast Updated: August 14, 2023

Whether you want to meet financial goals, handle an emergency, or rebalance your portfolio, understanding mutual fund units is important. Individuals can invest in mutual funds and take part in financial markets. Investors can build a diverse investment portfolio by investing in mutual funds, along with other investment tools. In this article, we will take you through all the details about mutual fund redemption.

What are Mutual Funds?

Mutual funds are investment vehicles that combine money from multiple investors to invest in various security funds such as stocks and bonds. These funds have managers who make investment choices on behalf of investors. 

Types of Mutual Funds

Mutual funds are classified into several categories; each has a different set of investment objectives, risk profiles and asset classes. Mutual funds are of various forms. Some of these are:

  • Money market funds
  • Bond funds
  • Stock funds
  • Target date funds

Step by Step Procedure for Mutual Fund Redemption

Mutual Fund redemption is the method by which an investor sells his/her mutual fund holdings back to the mutual fund company (AMC). Given below are different procedures associated with receiving your mutual fund units. Let’s dive deeper to learn how to withdraw money from mutual funds.

Online Redemption through AMC

Here are the steps for online mutual fund redemption:

  • Visit the AMC (Asset Management Company) or Registrar’s online portal.
  • Use your credentials to sign in to your account.
  • Select the mutual fund scheme from which you want to redeem the units.
  • Choose a method to sell some or all of your units.
  • Provide important information, such as the number of units to be redeemed.
  • Confirm the approval request.
  • Your request will be provided via SMS.
  • If you have enlisted your online banking order, the funds from your bank will be sent to you. Otherwise, a check will be mailed to your registered address.

Online Redemption through Trade or Demat Account

Here is another way to redeem mutual funds online:

  • Log in to your merchant or demat account.
  • Go to the mutual fund part of the account.
  • Select the mutual fund scheme from which you want to redeem the units.
  • Set the number or price of units to be purchased.
  • Confirm the acceptance request.
  • Wait for an electronic payout (NEFT or IMPS) in your linked bank account.

Offline Redemption through an Agent or Distributor 

The following are the steps:

  • Download the acceptance form from the website of the central registration service provider or contact your broker/distributor.
  • Fill out the acceptance form with the required information.
  • Visit the nearest office of the central registration service provider or your broker/distributor.
  • Submit a completed and signed acceptance form along with the required documentation.

Please note that the specific terms and requirements may vary depending on the particular AMC, underwriter, or broker you are dealing with. For specific instructions on redeeming mutual fund units, it is best to check their official websites or contact their customer support.

Also Read: When Should You Sell Your Mutual Funds?

Reasons for Mutual Fund Redemption

Investors redeem mutual funds for various reasons, which can be categorised into the following:

  • Value-based redemption: Investors redeem money when the financial goal for which the money was originally invested is achieved, such as buying a home or paying for education.
  • Acquisition based on performance: Investors may redeem a mutual fund that is consistently underperforming compared to its peer group and benchmark index. Investors can also choose to charge if they have concerns about the performance of particular projects.
  • Return-driven redemption: If a mutual fund has delivered exceptional returns in a short period of time, investors may choose to redeem and lock in returns considering the possibility of a market correction or short-term performance.

Considerations Before Redeeming Mutual Fund Units

There is no right or wrong mutual fund redemption time. It entirely depends on the individual. Keep in mind these few things if you are confused about when to redeem:

  • Short-term and long-term goals: Mutual funds can be borrowed to meet goals, such as funding a vacation, buying a car, or saving for long-term goals such as education, marriage, and retirement. Review your goals and see if your receipts align with your financial aspirations.
  • Market sensitivity and asset allocation: Some investors may choose to accept mutual funds or reallocate their investments into different assets depending on market conditions. For example, risk-averse investors may withdraw funds during slow market movements to minimise additional risk and potential losses.
  • Costs and fees: Consider your current and future financial obligations when deciding whether to redeem mutual funds. Evaluate potential expenses and determine whether taking the money will help you meet those financial commitments.

In the end, the decision on mutual fund redemption time should be carefully considered based on your financial situation, goals and risk tolerance. 

Also Read: Factors You Must Consider Before Investing In Mutual Funds


Mutual fund redemption allows investors the flexibility to recover their investments and achieve their financial goals. Seeking advice from a financial advisor can help navigate the intricacies of mutual fund return and ensure it fits into your overall financial plan. Remember that every investor’s journey is unique, and a timely, informed decision can help ensure a successful investment experience.


Is there any lock-in period for mutual fund redemption?

Some mutual fund schemes, such as tax-saving ELSS (Equity Linked Saving Scheme) funds, have a lock-in period, usually three years. During the lock-in period, you cannot redeem the units. However, most other mutual fund schemes do not have a lock-in period, and you can redeem them at any time.

Can I redeem only a portion of my mutual fund investment?

Yes, you can partially redeem your mutual fund units if the scheme allows partial redemptions. You can specify the number of units or the amount you wish to redeem.

How are taxes calculated on mutual fund redemption?

The tax on mutual fund redemption depends on the holding period and the type of mutual fund. For equity funds held for more than one year, Long-Term Capital Gains (LTCG) tax is applicable, while Short-Term Capital Gains (STCG) tax is applicable for equity funds held for one year or less. For debt funds, index funds, and hybrid funds, the tax rate may vary based on the holding period.

You May Also Like