Different Ways to Withdraw SIP Amount? Know Types of Mutual Fund Redemptions

Investing in mutual funds through a Systematic Investment Plan (SIP) is one of the most disciplined ways to build wealth over time. SIPs allow you to invest a fixed amount at regular intervals making it an accessible and flexible investment option. However there may be circumstances when you need to withdraw your investment. You can plan your SIP investments and estimate returns using the HDFC SIP Calculator.

However first you have to understand the process of SIP withdrawal, its implications and the factors to consider which are essential for making informed financial decisions. We are here to help you with the same in this article.

What is an SIP?

A Systematic Investment Plan (SIP) is a method of mutual fund investment where investors contribute a fixed sum at regular intervals.

This approach is built on the principles of rupee cost averaging and compounding, making it a reliable choice for long-term wealth creation. SIPs are popular due to their affordability, flexibility and ability to help investors navigate market volatility. Use the SIP Calculator to understand how periodic investments grow over time.

The automated nature of SIPs ensures consistent investing, removing emotional decision-making from the equation and helping investors stay committed to their long-term financial goals.

When Should You Withdraw From Mutual Funds?

You should consider withdrawing from mutual funds in the following situations:

1. Goal Achievement: When your financial goal (like buying a house or child’s education) is met.
2. Portfolio Rebalancing: To maintain the right asset allocation as per your risk appetite.
3. Underperformance: If the fund consistently underperforms its benchmark and peers over a long period.
4. Emergency Needs: In case of urgent financial requirements.
5. Change in Fund Objective: If the fund changes its investment strategy or risk profile.
6. Market Valuation: Some investors withdraw when markets are overvalued to book profits.

Always align withdrawal decisions with your financial goals not short-term market movements

Types of Mutual Fund Redemptions

1. Full Redemption: You withdraw the entire investment amount and close your mutual fund holding.
2. Partial Redemption: You withdraw a specific amount or number of units and the remaining continues to stay invested.
3. Systematic Withdrawal Plan (SWP): You set up a regular withdrawal (monthly, quarterly, etc.) from your fund units.
4. Auto Redemption: The fund is automatically redeemed after a fixed tenure (applicable to close-ended or ELSS funds after lock-in).
5. Switching: You redeem units from one fund and reinvest them in another fund under the same AMC.

Each type serves different financial needs and should align with your investment goals.

What are the Different Ways to Withdraw SIP Amount?

While SIPs are designed for long-term wealth creation, life’s unpredictability sometimes necessitates early withdrawals. Common reasons for SIP withdrawals include:

• Emergency medical expenses or unforeseen financial obligations
• Major life events such as education, marriage or property purchase
• Portfolio rebalancing to align with changing financial goals
• Taking advantage of better investment opportunities
• Meeting planned financial milestones

Understanding the withdrawal process becomes crucial to making informed decisions that minimise the impact on your long-term financial health.

How to Withdraw SIP Amount Online:

1. Through Broker or Distributor Services

When you’ve invested through a stock broker or distributor they serve as your primary point of contact for withdrawals. This process typically involves:

• Initiating Contact: Reach out to your broker with your folio number and investment details
• Documentation: Complete the redemption form with precise information about:
  • The scheme name and folio number
  • Number of units or amount to be redeemed
  • Bank account details for credit
• Verification: Your broker verifies the information and forwards it to the AMC
• Processing: The AMC processes the request and transfers funds to your registered bank account

This method provides the advantage of professional guidance throughout the process, ensuring all requirements are met correctly.

2. Direct Trading and DEMAT Account Method

For investors holding mutual fund units in demat form the withdrawal process becomes streamlined through their trading platform:

• Access your trading account through the website or mobile application
• Navigate to the mutual fund portfolio section
• Select the specific SIP investment you wish to redeem
• Choose between unit-based or amount-based redemption
• Verify your bank account details
• Confirm the transaction

The platform automatically routes your request to the AMC, making this one of the most efficient withdrawal methods.

3. Asset Management Company (AMC) Direct Process

Approaching the AMC directly offers another reliable withdrawal path:

• Online Method:
  • Visit the AMC’s official website
  • Log in to your investor account
  • Navigate to the redemption section
  • Select the scheme and specify redemption details
  • Complete the verification process
• Offline Method:
  • Visit the AMC’s local office
  • Submit a filled redemption form
  • Provide necessary identity verification
  • Receive acknowledgement of your request

4. Registrar and Transfer Agent (RTA) Facilitation

RTAs like CAMS or Karvy provide an additional channel for SIP withdrawals:

• Access the RTA’s online portal or visit their office
• Provide your folio number and investment details
• Complete the redemption request process
• Track your request status through their platform

For any queries or assistance during the process, investors can reach out to their broker, AMC or RTA’s customer service.

How to Withdraw SIP Amount Offline

Offline SIP withdrawal can be done through:

1. Through Distributors/Brokers:

• Collect and fill out a redemption request form from your broker.
• Provide necessary details like folio number, fund name and withdrawal amount.
• Attach identity proof (e.g., PAN card) and bank account proof (e.g., cancelled cheque).
• Submit the form to your broker who will process it with the AMC.

2. Through AMC Offices:

• Visit the nearest AMC branch and collect a physical redemption form.
• Fill in details such as scheme name, units to redeem and registered bank account details.
• Attach the required documents (identity proof and bank details) and submit the form.
• Funds will be credited to your bank account within the stipulated timeframe.

Key Reminders:

• Check for exit loads or lock-in periods.
• Ensure accurate bank details to avoid delays.
• Redemptions typically take T+2 working days to process.

Factors to Consider While Submitting a Mutual Fund Redemption Request

Understanding various factors that impact your SIP withdrawal helps make informed decisions:

1. Investment Type and Lock-in Considerations

Different mutual fund categories come with varying restrictions and implications:

• Equity Linked Savings Scheme (ELSS):
  • Mandatory three-year lock-in period
  • No partial withdrawals during the lock-in
  • Tax benefits under Section 80C
• Solution-oriented Funds:
  • Retirement funds with age-based lock-in
  • Children’s funds with lock-in until the minor attains majority
  • Goal-based restrictions on withdrawals

2. The Exit Load

An exit load is a fee charged for early redemption. Delaying withdrawals until after the exit load period can maximise returns.

3. Tax Implications

• Short-Term Capital Gains (STCG): Gains from holdings of less than one year are taxed as per your income tax slab.
• Long-Term Capital Gains (LTCG): Gains from holdings of more than one year are taxed at 12.5% (for equity funds) above ₹1.25 lakh of annual gains.

Conclusion

Withdrawing SIP investments is a simple process whether online or offline. However, consider lock-in periods, exit loads and tax implications before initiating a redemption request. SIPs are designed to encourage disciplined investment so withdrawing frequently may hinder long-term financial growth. To evaluate the potential returns on your mutual fund investments, try the Mutual Funds Return Calculator.