How to Sell Mutual Funds: A Step-by-Step Redemption Guide 

Mutual funds are very liquid investments, so you can decide when you want to completely or partially redeem or sell them. You might want to sell your mutual fund for several reasons, such as impending financial obligations, dissatisfaction with your returns, market fluctuations, or even if your risk appetite has changed. The equity-linked savings scheme (ELSS) fund is the sole exception to this rule, as it has a three-year lock-in period ahead of redemption. 

What Does It Mean to Sell or Redeem Mutual Funds? 

Simply put, redemption is the process of selling off your mutual fund investment back to the scheme it came from for the current net asset value (NAV). Another name for it is “exiting the scheme,” and depending on your preferences, this can be either a partial or full exit. In several situations, you may want to think about redeeming your mutual fund shares. For example, if you’ve reached your investing objectives or if you need to redeem your shares due to an emergency. There are, of course, more factors. 

When Should You Sell Your Mutual Funds? 

It is crucial to understand when to leave a mutual fund, even though frequent and unnecessary churn is best avoided. To avoid paying taxes, you shouldn’t disregard your exit strategy. There are many situations when you might consider selling your mutual fund units, some of which are: 

1. Underperformance: This is one of the most common reasons a lot of investors choose to exit or sell their units. Even while it’s normal for a fund to underperform for a few months or quarters, you shouldn’t rush to your mutual fund units. Good funds usually suffer short-term underperformance. You should only think about leaving if the underperformance persists for an adequate span of time, say one to two years, in comparison to its peers and benchmarks, and that too by a respectable margin (at least a few percentage points, consistently). 

2. Portfolio rebalancing: Selling a mutual fund may be necessary when rebalancing your portfolio. Over time, market fluctuations can shift your original asset allocation. For example, a 60:40 equity-to-debt allocation might drift to 75:25 during a bull run, increasing your risk exposure. Rebalancing, typically done annually or when allocations deviate by 5–10%, helps restore balance and ensures your portfolio stays aligned with your financial goals and risk tolerance. Remember, consistently following your asset allocation plan is more important than trying to time the market. 

3. Switching the type of funds: In 2025, most active large-cap funds are currently trailing their benchmarks and are having difficulty outperforming their passive counterparts consistently. Therefore, it makes sense for you to gradually, if not straight away, move away from active large-cap funds and towards passive large-cap index funds. 

4. Reaching your goal: Ultimately, achieving your financial goal often results from a combination of disciplined investing, rebalancing, and market performance. Ideally, you would have built the corpus you initially envisioned. For example, suppose you aimed to accumulate ₹30 lakh for retirement by 2030 through a balanced portfolio of 60% equity and 40% debt. Due to strong market performance, your portfolio grows to ₹32 lakh by 2027, surpassing your target ahead of schedule. However, the equity exposure may now have risen to 70%, increasing your risk. This is a key moment to reassess and rebalance in line with your original goal and risk appetite. 

5. Other possible considerations: You might also come across certain scenarios when it comes down to selling your mutual fund, such as, the fund’s regulations are changed, the fund manager changes, asset management company (AMC) mergers, or the fund is only a minor portion of your investment portfolio, and any changes wouldn’t highly impact your investment. 

How to Sell Mutual Funds Online and Offline 

Selling mutual funds is quick and simple. You can choose to sell all or a portion of your mutual funds either online or offline. Let’s get into each of these methods. 

How to Sell Mutual Funds Online 

You can choose to sell your mutual funds online via any of the following portals: 

• Through the AMC website/mobile app. 

• Through the website/mobile app of the registrar and transfer agent (R & T Agent) through which you invested in the scheme. 

• Through the online broker’s website/app, where you made your investment in the scheme. 

• Using your trading or Demat account, if you used the same account to purchase your mutual funds 

Accessing any of these portals will further give you clear instructions on how to sell your mutual funds. 

How to Sell Mutual Funds Offline 

In the offline mode, you have the option of selling your mutual fund directly to the AMC or via a broker or distributor. A redemption request form with the units to be sold and the specifics of your mutual fund plan must be completed. Send in the form that will be processed by the AMC, which will then transfer the redemption amount to your bank account once the paperwork is done, and the redemption is complete. Another option is to request a cheque, which will be sent to the address you provided. 

Step-by-Step Mutual Fund Redemption Process 

Essentially, there are a few steps involved that you need to follow to sell your mutual funds. A breakdown of these steps is given below. 

1. Log in to the mutual fund/broker account: Log in with your credentials. Whether you have directly made the investment or done it via a platform, make sure you can access your portfolio and make sure you have completed the know your customer (KYC) to activate your account. 

2. Select the mutual fund scheme: Find your portfolio and select the scheme you wish to redeem. 

3. Select redemption amount: Select either the number of units or the amount of money that you want to redeem. 

4. Enter bank details: Enter your updated bank details, including your account number, IFSC code, and branch code. Ensure all information is accurate and reflects your latest bank account to avoid any errors or delays in processing. 

5. Review exit load/ tax: Check if any exit loads apply to your request or if there are any exit charges you need to pay. 

6. Submit the request: Once you are sure of all the details, submit your redemption request. 

7. Track redemption status: Make sure that you are up to date with your request to ensure no delays. You would ideally receive an email confirmation with the redemption amount and the timeline. 

How Long Does It Take to Get Money After Selling Mutual Funds? 

The time to get your money varies according to which mutual fund you sold. 

If you sold a liquid fund, it would take you one to two working days to get your money credited to your linked account. 

If we’re talking about debt funds, it takes two to three days to get your money. 

Lastly, when it comes to equity funds, it might take between three to five days to complete the redemption process. 

Tax Implications on Selling Mutual Funds in India 

You should be mindful of the potential tax implications when you sell your mutual fund scheme. The tax implications are applied as follows and are contingent upon the type of scheme you are redeeming. 

Short-term capital gains are the returns you get if you redeem equity mutual funds within 12 months of investment. The tax rate on such gains would be 20%. The gains, however, would be considered as long-term capital gains if you sold the fund after 12 months. Up to ₹1.25 lakh, the gains would be exempt from taxes. However, a 12.5% tax would be applied to returns in excess of ₹1.25 lakh. 

Debt mutual funds, irrespective of holding period, are taxed as per your applicable slab rate.  

Conclusion 

Choose the best-selling strategy after learning how to sell your mutual funds with or without exit loads. When submitting your income tax returns, be sure to declare your returns along with the tax implications of the transaction. Don’t give up on your investment completely but sell money to fit your ever-changing investing tactics or to satisfy your financial needs. To effectively diversify your portfolio and meet your financial goals, consider investing across multiple schemes rather than focusing solely on a single sector or market capitalization. This approach helps spread risk and enhances the potential for more stable, long-term returns. 

FAQs 

Can I sell mutual funds anytime ? 

Yes, you can. However, receipt of funds into your account may take between 1 to 5 days depending on the type of mutual fund you sell. Some firms can charge you an early redemption fee. You should still avoid selling during the lock-in period. Understand the tax implications before you decide. 

How many days does it take to get money after redeeming mutual funds? 

The amount of time it takes to receive your money after redeeming a mutual fund depends on the type of scheme it is. Within a single working day, overnight and liquid funds are sent out. While equity-oriented funds usually take three to five business days, debt funds (apart from liquid and overnight funds) might take just two days. 

Is there any penalty for early mutual fund withdrawal? 

Mutual funds typically impose an exit load on units redeemed within a short holding period, typically 3, 6, or 12 months. This fee is meant to discourage early withdrawals and protect long-term investors from the impact of short-term trading.