How to Withdraw SIP Amount?

This article aims to help individuals understand the process of withdrawing their Systematic Investment Plan (SIP) money, a systematic strategy commonly used in mutual funds. SIPs allow individuals to invest a specific amount into a chosen mutual fund scheme on a regular basis, usually on a monthly or quarterly basis. It provides a comprehensive guide on how to withdraw their SIP amount, allowing them to take control of their financial journey and access their assets immediately or prepare for significant milestones.

What does Redemption from Mutual Funds Mean?

The process of selling your investments is called withdrawal. Redeeming is the term for this procedure in mutual funds. In a mutual fund system, you are effectively redeeming units when you take money out. You realise the value of the units you possess when you sell them at the relevant Net Asset Value (NAV).

Consider the following scenario: you have invested in 1,000 units of a mutual fund scheme. You can withdraw a certain sum in currency terms or redeem or sell a specific number of units. Redeeming 500 units from your mutual fund holding would be necessary if you wanted to withdraw Rs. 5,000 assuming that each unit is worth Rs. 1. In a similar vein, you have the option to take money out of your mutual fund portfolio in the amount of 10 or 900 units that you redeem.


Types of Mutual Fund Redemptions

Mutual fund redemptions come in two varieties:

  • Partial Withdrawal
    You can take partial withdrawals from mutual funds under this type. This implies that you keep the remaining investment in place while redeeming a portion of it. The aforementioned example represented a partial withdrawal, in which you took out Rs. 50,000, or a small number of units, from the Rs. 1 lakh, or 10,000 units, that you might have taken out as part of your mutual fund holding.
  • Full withdrawal
    When you fully redeem all of the units in your mutual fund folio a unique number given to each investment in a mutual fund scheme you are making a full withdrawal from your mutual fund scheme. In this case, you close the plan and withdraw all of your money, including any financial gains the fund may have made. Therefore, in the aforementioned case, you would have completely withdrew from the plan if you had taken out the 10,000 units.

Methods to Withdraw SIPs

Funds may be withdrawn from a mutual fund SIP in a few different ways. Listed below are a handful of them.

  • Utilising a Broker or Distributor
    You can take money out of your SIP if you invested in mutual funds through a distributor or broker. Along with providing the required documentation, which includes your investment amount, scheme name, and folio number, they will walk you through the withdrawal procedure. The broker or distributor will be able to manage the withdrawal effectively with the help of these documents, which usually contain investment and personal information.
  • Directly from a Trading and Demat Account
    Log in to your trading and Demat accounts, check your mutual fund holdings, and withdraw SIP investments. To withdraw a SIP investment, choose it and then adhere to the withdrawal policies provided by the site. If required, include more information and the withdrawal amount. The money will be sent to your chosen bank account via the site, which will also handle the withdrawal procedure. 
  • By Use of an Asset Management Company
    Get in touch with the asset management company (AMC) that manages your investment directly if you want to take money out of your SIP. For assistance, go to their website or give them a call at their customer service number. Give the required details, such as the scheme name and folio number. Enter the required SIP amount on a withdrawal form, which may be obtained in person or online. The withdrawal will then be handled by the AMC.
  • Asking the Transfer Agents (RTAs) and Registrar for Assistance
    Mutual fund withdrawals and other administrative duties are managed by registrars and transfer agents, or RTAs. Go to the mutual fund's website or get in touch with customer service to get in touch with RTAs for help. Provide details such as the plan name and folio number so that your investment may be identified. RTAs will give you the required documentation and walk you through the procedure. You can visit the mutual fund's office, phone their hotline, or find their contact information on their website. 

SIP Withdrawal Process

Here are the in detail SIP withdrawal process you should follow: 

  1. Open Your Account and Log-in.
    Use the broker's or mutual fund's official website or mobile app to access your account.Log in with your credentials to access the platform.
  2. Go to the Section on Withdrawal.
    Locate and browse to the withdrawal or redemption option once you're within your account. The user-friendly interface that most brokerages offer usually makes it simple to find this choice.
  3. Enter the Withdrawal Information.
    Input the required information for the withdrawal, including the desired bank account to receive the cash and the amount of the withdrawal. Verify the correctness of all the information twice.
  4. Decide on a Withdrawal Strategy.
    Select the method of withdrawal that you desire. Options including direct bank transfers, checks, and electronic funds transfers are available to you. Choose the option that best fits your needs.
  5. Verify and Send 
    Examine the specifics of the withdrawal before approving your request. Once satisfied, send in your request for a withdrawal. You will receive an email or confirmation message from your broking platform confirming your request.
  6. Keep an Eye on Your Bank Account
    Pay special attention to the credited amount in your specified bank account. You should anticipate the cash to appear in your account within a certain amount of time, even though processing times might vary. For help in the event of any delays or problems, contact customer care.

Things to Keep in Mind While Withdrawing Funds from a Mutual Fund SIP 

If you are looking to withdraw funds from a SIP scheme you have invested in, make sure to take a look at the following aspects that can help you make the right decision down the line.

  1. Tax Implications
    The Income Tax Act in India outlines specific rules for receipts from investment withdrawals. Debt mutual funds have a 20% tax rate on short-term capital gains, whereas equity-oriented mutual funds have a 15% tax if they are withdrawn within a year. While short-term profits are added to yearly income, long-term gains over one lakh rupees are subject to 20% tax. Plans for mutual funds may contain a lock-in duration that limits profits but prevents withdrawals. For tax guidance and tax savings, it is best to speak with a tax expert.
  2. Exit Load
    Mutual funds charge transaction fees known as entrance and exit loads when purchasing or selling plans. When monies are redeemed before the specified period, exit loads are usually 1%. As they usually happen before the scheduled period, fund managers' fees might reduce net earnings, therefore it's important to review these burdens when requesting for early withdrawals.
  3. Processing Time and Lock-in Duration
    Investments in mutual funds are subject to permission criteria for withdrawals, which include tax rates, lock-in periods, and transaction costs. Open-ended mutual funds are quite liquid, but closed-ended mutual funds usually have a lock-in period of several months to three to five years. Withdrawals are permitted at any moment following the conclusion of the lock-in period; early withdrawals will incur a penalty.

Mutual fund investments may be an excellent source of cash during difficult or emergency situations. It provides you with fast access to funds in addition to freedom with withdrawals. It is important to completely understand the withdrawal procedure and determine if it should be completed online or offline before submitting a redemption request. Finally choose a reliable stock market app for your better investment.

FAQs on How to Withdraw SIP Amount

On any working day, a redemption request may be submitted. It is always the investor's choice to sell all or part of their investment. Redeeming an investment usually happens when it reaches its goal or target.

In most cases, the AMC will deposit money into your account three or four business days after receiving your redemption request.

Mutual fund units may be redeemed in line with individual investment goals and preferences. Investors should carefully consider their withdrawal choices before making a decision, since this might directly affect their capacity to generate higher returns.

Refunds from mutual funds, including lump sum and SIP deposits, are taxable when redeemed. Whether the gains are categorised as long-term capital gains (LTCG) or short-term capital gains (STCG) determines the taxes. Whereas LTCG has distinct tax rates and exemptions depending on the type of mutual fund, STCG is charged at your income tax slab rate.

Yes, after a year, you are able to withdraw your SIP. It will be subject to reduced implied taxes as it would be seen as a long-term capital gain.