How To Withdraw SIP Amount?

Investing consistently in a mutual fund via a Systematic Investment Plan (SIP) can help you create wealth in the long run. However, due to unavoidable circumstances or emergencies, you may find yourself wanting to withdraw your mutual fund investments. 

As an investor, you need to be aware of how to withdraw money from a mutual fund SIP investment, even if you don’t plan on redeeming it anytime soon. Continue reading to find out all about mutual fund SIP withdrawals including the things you need to keep in mind when submitting a redemption request. 

What Are the Different Ways to Withdraw SIP Amount? 

The process of withdrawing your mutual fund SIP investments is simple and shouldn’t take too long. There are multiple ways to place a redemption request. Here is a quick overview of some of the methods through which you can make a mutual fund SIP withdrawal. 

Through a Broker or Distributor

Most mutual fund schemes have two kinds of plans – regular and direct. If you’ve opted for a regular plan, you’re likely to have invested through a mutual fund distributor or an intermediary like a stockbroker. In this case, you can simply get in touch with the broker or distributor through whom you invested to withdraw your investments. 

That said, keep in mind that the withdrawal process may vary slightly depending on the intermediary and will most likely require you to fill out a redemption request form. When filling out the form, make sure to enter all the relevant details, such as your mutual fund folio number, the name of the scheme and the number of units you wish to redeem, among others. Additionally, you may also be required to submit a few documents, such as a cancelled cheque leaf, proof of identity and proof of address, along with the redemption form. 

Once you submit the form to the intermediary, they will verify the same and forward it to the Asset Management Company (AMC). The funds will be credited to your bank account after the AMC processes your request. The entire process may take anywhere from a few days to a few weeks depending on the intermediary and AMC. 

Using Your Trading and Demat Account

If you’re wondering how to withdraw money from SIP online, you can use your trading and demat account if you hold mutual fund units in the demat mode. In fact, placing a redemption request through your trading account is often the easiest method. 

All you need to do is:

1. Log into your trading account 
2. Navigate to the mutual fund holdings section. 
3. Once you’re there, simply select the mutual fund SIP you wish to redeem and proceed to place a redemption request. 
4. Check the Net Asset Value (NAV) of the fund and enter the number of units you wish to redeem. 

Once you’ve entered all the details, place the request online. Once the request is placed, it will be forwarded to the Asset Management Company (AMC) for further verification and processing. Since the SIP withdrawal request is placed online, it should only take a few days to receive the redemption amount. 

Through the Asset Management Company

You can also directly place an SIP withdrawal request through the Asset Management Company (AMC) managing the mutual fund. Some AMCs have dedicated online portals where you can register as an investor and place a redemption request online. 

With a few AMCs, however, you will have to place the request offline by submitting a filled-out and signed copy of the redemption request form along with the required documents. If you’re unsure of the redemption process, you can always contact the AMC via their official website or customer service support. 

Through the Registrar and Transfer Agent (RTA)

Mutual fund houses, especially those with significant Assets Under Management (AUM) and multiple funds, often appoint a dedicated entity known as a Registrar and Transfer Agent (RTA). The responsibility of an RTA is to maintain a detailed list of investors, including their personal information, their folio numbers, and the number of mutual fund units they own. Additionally, they’re also tasked with processing purchase and redemption requests. 

You can make an SIP withdrawal by contacting the Registrar and Transfer Agent of the mutual fund you’ve invested in. Some RTAs have dedicated online portals that allow you to place redemption requests online, whereas, with others, you need to place the request through the offline mode.  

Factors To Consider While Submitting a Mutual Fund Redemption Request 

Now that you know how to withdraw money from a mutual fund SIP investment, let’s look at a few key factors you need to consider when submitting a redemption request. 

• Lock-in Period

Certain types of mutual funds, like the Equity-Linked Savings Scheme (ELSS) have a mandatory lock-in period of 3 years. During this time, you cannot withdraw or redeem your fund units. However, once the lock-in expires, you’re free to liquidate all of your holdings. 

• Exit Load 

Some mutual funds levy a charge known as an exit load when you place a redemption request. The exit load is primarily levied to discourage you from redeeming your investments and is expressed as a percentage of the redemption amount. The percentage of exit load varies from one fund to another and can range anywhere from 0.5% to 2% of the redemption amount.

• Holding Period 

The gains from a mutual fund investment are classified into either Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG), depending on how long you hold the units. If the holding period is less than 12 months, the gains are classified as STCG, and if the holding period is more than 12 months, the gains are classified as LTCG. The rate of tax applicable on the gains varies based on whether the gains are classified as STCG or LTCG. For instance, STCG is taxed at 15% and LTCG is taxed at 10%.  

Conclusion

With this, you are well-versed in how to withdraw the SIP amount. Although mutual fund investments can be used to meet your fund requirements, it is advisable to refrain from redeeming them unless it is an emergency. Frequently redeeming your investments can quickly derail your progress and may even make it tougher to meet your financial goals. 

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