Things to Know About Exit Load Before Redeeming Mutual Funds

Mon, 19 May 2025

3 mins

Mutual Funds

What is an Exit Load in Mutual Funds?

Exit load is a fee or charge that a mutual fund imposes on investors when they redeem (sell) their units of the fund before a specified period. It is designed to discourage early withdrawals and to compensate the fund for the costs associated with redeeming the investment.

Exit load depends on type of mutual fund and varies from fund to fund. To explore the different types of mutual funds, feel free to check out our detailed blog Types of Mutual Funds in India: From Equities to Debt.

Earlier, schemes had the flexibility to differentiate between different classes of investors within the same scheme, by charging them different levels of load. Further, all the money collected as loads were available for the AMC to bear various selling expenses. There were liberal limits on how much could be charged as loads.

SEBI has banned entry loads. So, the Sale Price needs to be the same as NAV. While charging exit loads, no distinction will be made among unitholders on the basis of the amount of subscription. While complying with the same, any imposition or enhancement in the load shall be applicable only on prospective investments. The parity among unitholders on exit load shall be made applicable at portfolio level.

• No exit load will be charged on bonus units and units allotted on reinvestment of dividend.
• Exit loads have to be credited back to the scheme immediately i.e., they are not available for the AMC to bear selling expenses.

• Why is Exit load levied?

  Exit Load is like a penalty for premature redemptions because it is meant to discourage investors from selling their Mutual Fund investments too soon. Mutual Funds are not meant for short-term investments unless you are parking your surplus cash in a liquid fund.
  
  Since Mutual Funds are subject to market volatility, they are best suited for medium to long-term goals. Hence, most Mutual Fund schemes except liquid funds charge an exit load if investors sell their investment within the stipulated period.

• How to calculate Exit load in Mutual funds?

  Suppose a fund has an exit load of 1% if you sell within 1 year.
  
  If you invested ₹1 lakh and you sell it after 8 months when its value becomes ₹1.10 lakh, you will have to pay 1% of ₹1.10 lakh = ₹1,100 as exit load.
  
  You will receive ₹1,10,000 – ₹1,100 = ₹1,08,900.

• Do I have to pay exit load even if I am selling at a loss?

  Yes, you still have to pay the exit load even if you are selling at a loss. The exit load is charged on the redeemed amount — not on your profit or loss.

   

  It’s simply a percentage fee the fund charges for early withdrawal, no matter whether your investment has grown or fallen in value.

• Is exit load applicable while switching within funds within same AMC?

  Yes, exit load can apply even when you switch between funds within the same AMC (Asset Management Company), if the original fund has an exit load condition and you switch before completing the required holding period.

• How can I avoid paying exit load in mutual funds?

  To avoid paying exit load, you should first ensure that you hold your investment for at least the minimum period specified by the fund - most funds waive exit load once you stay invested beyond a certain time (like 6 months or 1 year).
  
  Another way is to invest in mutual funds that do not have any exit load; certain categories like overnight funds, liquid funds (after 7 days), and some index funds typically have no exit charges.
  
  Additionally, some asset management companies (AMCs) allow switching between specific schemes without applying an exit load, although this is not common and usually applies only under specific conditions. Always check the fund’s offer document or factsheet carefully to confirm the applicable rules.

• Which Mutual fund has no exit load?

  To get latest Mutual funds which levy no exit load please reach out to us on 8047593769 or you may connect with your InCred Premier relationship manager to ask other queries.

• How is exit load calculated in SIPs?

  In SIPs (Systematic Investment Plans), each installment is treated as a separate investment with its own holding period. Exit load is calculated individually on each SIP installment based on how long that specific installment has been invested. When you redeem your units, the fund typically uses the FIFO (First In First Out) method - meaning the oldest units are sold first.
  
  If a particular SIP installment is redeemed before completing the exit load period (like 12 months, if applicable), exit load will be charged on the redeemed amount from that installment. Installments that have completed the required holding period are redeemed without any exit load.

• What is the impact of exit load on my investments?

  Exit load reduces the amount you receive when you redeem your mutual fund units before the specified holding period. It is charged as a small percentage of the redemption amount, and not on your profits alone. Even if your investment has fallen in value, exit load will still be deducted.
  
  While the exit load is usually low (around 0.5%–1%), it can still slightly erode your returns, especially if you redeem early or frequently. Over time, avoiding exit loads by holding investments for the required period can help you maximize your overall returns and reduce unnecessary costs.

• To Bring it to a close

  Exit loads may seem small, but understanding them can make a real difference to your investment returns. At InCred Premier, we’re committed to helping you invest smarter with complete clarity - whether it’s about exit loads, fund selection, or portfolio strategy. Explore the right Mutual Funds with InCred Premier. Call 8047593769 or open your or connect with your Relationship Manager to get started today!