Exit load

An exit load is a charge some schemes apply when you redeem units before a set period, to discourage very short holding. It is deducted from the amount you get back.

How it works

The load is a small percentage, often around 1%, charged only if you sell within the scheme’s stated window, commonly up to a year. Sell ₹10,000 of units inside that period with a 1% load and you receive ₹9,900; the ₹100 stays with the scheme, for the benefit of the investors who remain. Hold past the window and the load no longer applies, so you get the full NAV for your units.

Why funds charge it

An exit load is not a profit for the fund house; it is a brake on rapid in-and-out trading, which raises costs for everyone in the scheme. By making a quick exit slightly expensive, it nudges investors to stay for the horizon the fund is built for. Equity funds and many others carry one; liquid and overnight funds usually have little or none, because they are designed for very short holding.

How to avoid it, and what else applies

The simplest way to avoid an exit load is to hold your units past the stated period, which is easy if you invested with a plan rather than to trade. Remember it is separate from capital gains tax, which can also apply when you redeem. Always check a scheme’s exit-load rule in its factsheet before investing.