Redemption

Redemption is when you sell your mutual fund units back to the scheme and receive money. Open-ended funds allow it on any business day, priced at that day’s NAV.

How it works

You place a redemption request for some or all of your units, and the fund buys them back at the applicable NAV, then transfers the money to your registered bank account. Unlike a share, you are not finding a buyer on an exchange; the fund itself redeems your units, which is what “open-ended” means. The NAV you get follows the cut-off rules, so the timing of your request matters.

How long it takes, and what it costs

For equity funds the money usually reaches your bank in a business day or two; liquid and overnight funds are faster, and some offer instant redemption up to a capped amount for emergencies. Two costs can apply: an exit load if you redeem within the scheme’s stated period, and capital gains tax on any profit, depending on the fund type and how long you held it.

Redeeming sensibly

If you need a regular income rather than a one-off, a systematic withdrawal plan redeems a fixed amount each month instead of selling everything at once. And since the NAV on the day decides what you get, redeeming into a sharp market dip locks in that lower price, so for long-term money it is worth not redeeming on impulse.