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Ventura Wealth Clients
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Systematic Investment Plans, also known as SIPs, are a popular and convenient way to grow wealth. However, there may come a time when you need to access the funds you have invested. Withdrawing from an SIP is a straightforward process, provided you follow the correct steps. 

This blog will explain how to withdraw from an SIP, highlighting methods and considerations for a smooth experience. By the end, you'll understand how to withdraw money from mutual fund schemes.

Steps to withdraw your SIP amount

There are several ways to withdraw money from your SIP. The method you choose depends on how you invested in the mutual fund—through a broker, online portal, or directly via the asset management company. Below are the main approaches:

  1. Using a broker or distributor

If you invest in a mutual fund through a broker or distributor, the withdrawal process is typically simple. Follow these steps:

  • Contact the broker: Reach out to the broker or distributor who assisted with your investment.
  • Provide required details: Share information such as your folio number, scheme name, and the number of units or amounts to be redeemed.
  • Complete the paperwork: Fill out any redemption request forms provided. You may need to submit additional documents like a cancelled cheque or proof of identity.
  • Wait for processing: The broker will forward your request to the Asset Management Company (AMC) for approval. Once processed, the amount will be credited to your account.

  1. Online withdrawal through a trading or demat account

Investors holding mutual fund units in demat form can withdraw money online through their trading accounts. Here's how:

  • Log in to your account: Sign in to your trading or demat account using your credentials.
  • Select the SIP: Go to the mutual fund section and locate the SIP you want to redeem.
  • Enter details: Specify the number of units or amount to withdraw.
  • Place the request: Submit the redemption request online.

Once submitted, the AMC processes the request, and the funds are credited to your registered bank account, typically within a few days. This is one of the quickest ways to withdraw money online.

  1. Direct withdrawal through the Asset Management Company (AMC)

If you have invested directly with the AMC, you can redeem your SIP units via their portal or offline methods:

  • Online method: Log in to AMC’s website and navigate to the redemption section. Enter your investment details and submit the request.
  • Offline method: Visit the AMC’s office or download their redemption form from their website. Fill out the form, attach the required documents, and submit it at their office.

This method is useful if you prefer direct interaction with the AMC or need assistance with your request.

  1. Through Registrar and Transfer Agents (RTAs)

Registrars and Transfer Agents (RTAs) like CAMS and KFintech manage investor records and transactions for many mutual funds. You can withdraw SIP amounts by contacting the RTA. This is how:

  • Online portal: You can access the RTA’s online portal, register as an investor, and follow the redemption process.
  • Offline process: Visit the RTA office, submit a completed redemption form, and provide the necessary documents.

Factors to consider before withdrawing SIP

Before initiating a withdrawal, consider the following aspects to ensure a smooth process:

  1. Lock-in period

Some mutual funds, such as Equity-Linked Savings Schemes (ELSS), have a mandatory lock-in period. During this time, withdrawals are not permitted. Check if your investment is subject to such restrictions.

  1. Exit load

Certain mutual funds charge an exit load if you withdraw units within a specified period. The exit load typically ranges from 0.5% to 2%. Ensure you are aware of any exit load before placing a redemption request.

  1. Tax implications

Withdrawals may be subject to taxes based on your holding period:

  • Short-Term Capital Gains (STCG): Gains from units held for less than 12 months are taxed at 20%.
  • Long-Term Capital Gains (LTCG): Gains from units held for more than 12 months are taxed at 12.5% if they exceed ₹1.25 lakh in a financial year.

Understanding these implications can help you plan your withdrawals effectively.

Mutual funds: When should you withdraw?

When considering redeeming your mutual fund investments, especially from short-term SIPs, it's essential to be aware of exit loads.  These charges, levied by the fund house, can significantly impact your returns if you withdraw before a specified period.  

Long-term SIPs generally don't have exit loads after a certain holding period, making them more suitable for long-term goals.  Regardless of the investment horizon, premature withdrawals can hinder your wealth accumulation.  Therefore, redeem your mutual fund investments only when absolutely necessary or when you've reached your financial targets.  For guidance on choosing the right mutual funds to invest in for your goals, whether short-term or long-term, consulting a financial advisor is recommended.

How an SIP calculator can help

If you’re unsure about when to withdraw or how much to expect from your SIP investment, an SIP calculator can be a useful tool. An SIP calculator helps you estimate the potential returns on your investments based on various parameters like the investment amount, tenure, and expected rate of return. Using an SIP calculator can help you plan your investments more effectively and give you a clear idea of the returns you might receive when you decide to withdraw.

Common mistakes to avoid during SIP withdrawal

Withdrawing from your SIP requires careful consideration to make sure it aligns with your financial goals and minimises potential losses: 

  • Frequent withdrawals: Avoid making frequent withdrawals unless necessary. It can disrupt your financial planning and reduce the power of compounding.
  • Ignoring documentation: Ensure all forms and documents are correctly filled out to avoid delays.

Simplify SIP withdrawals

Withdrawing your SIP is a straightforward process, whether you go for an online or offline method. Before initiating the withdrawal, ensure you’ve considered factors like lock-in periods, exit loads, and tax implications. By carefully planning your withdrawals, you can ensure your investments continue to work for your financial goals while meeting immediate liquidity needs.