Simple Steps to Withdraw Money from Mutual Funds

Posted on Tuesday, June 24th, 2025 | By IndusInd Bank

Life doesn’t always follow a script. Whether it’s a sudden expense, a major milestone, or just a shift in your financial plans, there may come a time when you need to access your mutual fund investments. The good news? It’s not a complicated process.

Whether you’re new to mutual funds or have been investing for years, understanding how redemptions work can save you time, money, and stress. Let’s walk you through it—step by step.

What Does Redemption from Mutual Funds Mean?

Think of mutual fund redemption as cashing out. You sell a portion—or all—of your units in a scheme, and in return, the equivalent amount (based on the day’s NAV or Net Asset Value) is transferred to your registered bank account.

Most mutual funds in India allow you to redeem units on any business day. Once your request is processed, the funds usually reach your account within two working days (T+2), although this can vary slightly depending on the platform or AMC.

Types of Mutual Fund Redemptions

You have options when it comes to withdrawing your money. Here are the common ways investors redeem their mutual fund investments:

• Full Redemption: Want to exit completely? You can sell all your units and withdraw the entire amount.
• Partial Redemption: Need only part of the money? Redeem some units and let the rest stay invested.
• Systematic Withdrawal Plan (SWP): Prefer a steady cash flow? You can set up regular withdrawals—monthly, quarterly, or at any interval you choose.

Also Read: Mutual Fund e-KYC: Documents Required, Process, and Status Check

Steps to Withdraw Money from a Mutual Fund

No matter where you’ve invested—via your bank, AMC, or a third-party app—the steps are usually similar:

• Log into your mutual fund account or investment portal.
• Choose the scheme you want to withdraw from.
• Enter how many units or how much money you want to redeem.
• Confirm your bank account details.
• Hit submit.

That’s it! The amount gets credited based on the applicable NAV and standard processing timelines—usually within 1 to 3 business days.

Can You Withdraw Mutual Funds Anytime?

Yes—but with some conditions.

• Open-Ended Funds: These are flexible. You can usually redeem them on any working day. But certain schemes, like ELSS, have a mandatory 3-year lock-in.
• Closed-Ended Funds: These are less flexible. You can only withdraw once they reach maturity.

And don’t forget to check for exit loads. Some funds charge a small fee if you redeem too soon.

How to Withdraw Mutual Funds Online?

These days, withdrawing money is as easy as shopping online. Here’s how you can do it:

• Via your bank’s online platform: Login, select your mutual fund, and follow the redemption instructions. If you’re using IndusInd Bank’s Wealth portal, it’s a smooth ride.
• Through AMC websites: Head to the fund house’s site, enter your folio number, and place a redemption request.
• Registrar platforms: Use services like CAMS or KFintech to manage and redeem across multiple AMCs.
• Third-party apps: Platforms like Groww, Zerodha, and Paytm Money let you redeem directly through their apps.

Most platforms also show the status of your redemption, so you know exactly when to expect the funds.

Things to Consider Before Withdrawing Mutual Funds

Withdrawing might seem simple, but a little planning can go a long way. Here are a few things to keep in mind:

1. Exit Load and Holding Period

If you pull out your money too soon, you might lose a small percentage as an exit load—typically 0.25% to 1%.

2. Tax Implications

Redemptions can attract capital gains tax. However, there have been certain changes in how much tax the government levies depending on when you have purchased the mutual fund units that you are planning to redeem.

Equity Funds

• Short-Term Capital Gains (STCG): If held for less than 12 months, gains are taxed.
• Long-Term Capital Gains (LTCG): Gains above ₹1 lakh in a financial year are taxed (without indexation).

Debt Funds

• Capital gains from debt mutual funds are taxed as per the investor’s income slab.

Check out this table to understand taxation on redemption of Equity and Debt Mutual Funds:

3. Lock-in Period

Some funds just don’t let you redeem right away:

• ELSS (Equity Linked Savings Scheme): Locked in for 3 years.
• Children’s Funds or Retirement-Oriented Funds: May have age-based or goal-based restrictions.

4. NAV Cut-off Timing

The Net Asset Value (NAV) applied to your redemption depends on when your request is submitted and whether the funds are available in your folio.

As per SEBI guidelines, same-day NAV is applicable only if the redemption request is submitted before 3:00 PM, along with full availability of units.

Also Read: What is NAV in Mutual Funds & How is it Calculated?

5. Market Conditions

It’s tempting to redeem when markets dip—but acting out of fear can lead to losses.

6. Impact on Financial Goals

Ask yourself: Why am I redeeming?

If this fund was meant for something important, like retirement or a child’s education, pulling out early could derail your plans.

7. Systematic Withdrawal vs Lump Sum

If you need regular income, consider setting up a Systematic Withdrawal Plan instead of redeeming everything.

By keeping these factors in mind, you can make more informed decisions and ensure your mutual fund withdrawal aligns with your overall financial strategy—not just short-term needs.

Wrapping Up!

Withdrawing money from mutual funds doesn’t have to be stressful. A little know-how goes a long way. By understanding the types of redemptions, key rules, and things to watch out for, you can make decisions that fit both your immediate needs and long-term goals. Still unsure? Reach out to a certified financial advisor or talk to your bank’s relationship manager. It’s always better to ask than to guess.