June 06, 2024
4 mins read
Investing can be overwhelming at first, and mutual funds can be even more confusing. That is why Systematic Investment Plans (SIPs) exist. SIPs help people easily and flexibly invest in mutual funds regardless of experience or knowledge about the market. You can invest a very manageable amount every month and build wealth over time without worrying about the market.
Now to the best part: you can easily withdraw from an SIP as easily as you started one. However, you must be mindful of the lock-in period, exit loads, and tax consequences. But once you know the process, withdrawing your SIP amount—whether online or offline—is straightforward.
In this guide, I’ll walk you through everything in a way that feels easy to follow, like a chat with a friend.
Imagine you want to buy a large fruit basket every month, but instead of paying all at once, you buy a few fruits every week. At the end of the month, you still have your basket full of fruits, but you didn’t have to spend a huge sum at one go.
That’s exactly how an SIP works. You regularly put a little fixed amount into a mutual fund you select. Over time, the investment gains, thanks to two major concepts:
Rupee Cost Averaging – When you invest at fixed intervals, you will buy more units at prices low and fewer units at prices high. This helps smooth out the risks of the fluctuations in the market.
Compounding – Your returns are compounded over time. To make a comparison, your investment is like a seed, eventually turning into a tree and the tree later provides seeds for additional trees.
And the best part, you do not spend all day watching the stock market!. Your money quietly works in the background while you carry on with your daily life.
The online method is the easiest and most convenient way to withdraw your SIP money. You don’t have to step out of your home, and the process usually takes only a few minutes. There are two main ways you can do this:
If you started your SIP through a broker, demat account, or trading platform, you can log in to the same app or website. Once inside, head over to the Mutual Funds section. From there, select the SIP you want to redeem.
You’ll be asked whether you want to withdraw the entire amount or just a partial amount. After filling in the details and confirming your linked bank account, you simply submit the redemption request. Within a few working days (usually 3–5), the money lands in your bank account.
If you choose to deal directly AMC's official website or mobile app, simply sign in, you will find “redeem” or “withdraw” options. Just fill in the necessary information and submit the withdrawal request. On confirmation, the AMC will transfer the withdrawal amount directly into your registered bank account.
Simple, right? Online withdrawals are quick, paperless, and hassle-free.
Not everyone is comfortable with online transactions, and that’s okay. You can also withdraw your SIP money offline. Yes, it takes a little longer than the online method, but the process is still straightforward.
If you started your SIP from a distributor or broker, simply contact them. You have to fill a redemption form that mentions your folio number, the name of your scheme, and the number of units (or amount) you intend to redeem. You can submit that redemption form to your broker or distributor and they will do everything for you. Once they have processed your request, the money will be transferred directly to your bank account.
You can see the office of the Asset Management Company also, and you will need to fill out and submit a redemption form. Once the AMC has processed your request, the redemption amount will be sent to your registered bank account.
Cash withdrawal will take some time overdue the process, but it is also fine if you want to address someone face-to-face or do not have a good internet connection.
Before you hit the redeem button, there are a few important things you must check. These factors can make a big difference in how much money you actually take home:
Lock-in period: Some SIPs, like ELSS (Equity-Linked Savings Scheme), come with a 3-year lock-in period. You cannot withdraw your money until this period is over. So always check the terms before investing.
Exit load: Certain mutual funds charge a small fee if you redeem your investment before a set holding period (usually one year). This fee is called an exit load and can slightly reduce your returns.
Tax rules: When you withdraw, your gains are taxed as either Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG). STCG is taxed higher, while LTCG often has lower rates. Knowing the tax rules helps you plan your withdrawals better.
Here’s a step-by-step breakdown of how you can withdraw your SIP amount:
Log in to your trading account platform or AMC’s website/app.
Choose the mutual fund scheme you want to withdraw from.
Decide on redemption type – full withdrawal (all units) or partial withdrawal (some units).
Check your bank details linked with the account.
Submit the withdrawal request.
The AMC will process it, usually within 3–5 working days.
The amount is transferred to your registered bank account.
That’s it—you’re done!
It is not hard to withdraw from your SIP. The important thing is knowing the finer details, like lock-in period, exit load and tax aspects to ensure that you do not get surprised later.
If you plan for the withdrawal, not only will you benefit from the compounding nature of your continuous investment, but you will withdraw your investments wisely to help maximise your returns.
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You can withdraw your SIP amount online through your trading account or the mutual fund's Asset Management Company (AMC) portal. Log in, navigate to the mutual fund section, select your SIP, and submit the redemption request. The proceeds will be credited to your linked bank account after processing.
Offline redemption involves filling out a SIP redemption form and submitting it to your mutual fund distributor or the AMC's branch office. The redemption process may take longer compared to online methods.
Yes, some mutual funds have a lock-in period, especially Equity-Linked Savings Schemes (ELSS). You must wait until the lock-in period expires before redeeming your SIP units.
An exit load is a fee charged when redeeming mutual fund units before a specified period, typically one year. This fee is deducted from the redemption amount.
Yes, the tax treatment depends on the holding period. Short-Term Capital Gains (STCG) tax applies if units are sold within three years, while Long-Term Capital Gains (LTCG) tax applies if held longer.
Yes, you can redeem a partial amount by specifying the number of units or the amount you wish to withdraw. Ensure that the remaining investment aligns with your financial goals.
You can track the status by logging into your trading account or the AMC portal. Most platforms provide updates on the redemption process and the expected credit date.
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