Exit Load in case of SIP

POSTED BY Tarun ON March 22, 2011 3:29 pm COMMENTS (18)

Hi Experts,

As most of the the MFs are having exit load if the investor exit from the fund within one year of investment. Kindly make it clear does this applies to each and every installment of SIP or this is applicable from the start of SIP only.

Eg – I started a SIP on 1st Jan 2011 with Rs. 1000. And there is a exit load if i exit within one year. Now my question is, does exit load is valid for each and every installment of SIP like 1-1-2011 installment exit load valid till 31-12-2011, 1-2-2011 installment exit load valid till 31-1-2012 ??

 

Tarun

18 replies on this article “Exit Load in case of SIP”

  1. deepak says:

    hi

    for calculation of exit load will the sale of units be reduced from a folio on first-in-first-out basis ?
    example if 1000 units are purchased on 12/3/14 and another 2000 units are purchased on 18/6/14
    and I sell 1000 units on 12/3/15 , then exit load will be NIL ?
    and if I sell 1500 units on 12/3/15, will the exit load be on 500 units only ? Please confirm.

  2. Dev says:

    If i purchase 10 unit every month through sip thus after two year i have 240 unit of mf but i wan sell 100 now and keep 140 unit in account . In this case i have to pay tax and exit load or not … Plz tell

    1. You will have to see what is the exit load structure of the fund for htat.

  3. D M Jha says:

    Exit load will be applicable on those instalments which have been invested within one year of redemption .

  4. Tarun Aggarwal says:

    Tahnks everyone for the imformation provided. This is a awesome website. learning a lot from Manish and all others. Hope ill also make sum money from this.

    Tarun

  5. Tarun Aggarwal says:

    Hi Manish,
    Thanks for the reply. I was not aware of this before and was under the impression that exit load will be valid only from the date of start of SIP.
    Can you suggest the best strategy (where one need not to pay any tax as well as exit load) one should follow to withdraw money from the mutual funds in case of SIP keeping in mind the time horizon for which one is investing. Eg – If one person is investing in a MF through SIP keeping the time horizon of two years, then what should be his withdrawal strategy?
    Also, it will be helpful if you suggest/write some article where investors would get to know all the charges, taxes etc he has to pay at the time of exit from any investment instrument like MF.

    Tarun

    1. moneysights.com says:

      Hi Tarun,

      While your question of best approach/ strategy to avoid charges/taxes is appreciated, but we i’m afraid its not the best way to look at Mutual Fund investments. Ofcourse, nobody likes to pay taxes/ charges that eat into returns. But your redemption/ withdrawals shall actually be governed by your time horizon, achievement of goal value & periodic re-balancing rather than optimizing of taxes. If the opportunity is available to minimize them, avail them. But over-planning for it will end up in sub-optimal choice of investment instruments.

      If you have a time horizon in place, you need an asset allocation plan first and stick to it. Here is an article on re-balancing can help you – http://goo.gl/D8uUx

      While re-balancing, if you wish to save taxes/ charges, you can always achieve re-balancing by stopping SIPs & then re-starting them

      Santosh Navlani | moneysights.com

    2. Tarun

      The only way you can avoid paying exit load is to redeem the mutual funds after 1 yr . This is the only withdrawal strategy .

      Manish

      1. Sreenivas says:

        Manish,

        But in this case, we can avoid paying exit load of only the first month and we will end up paying the exit load for the 11 months which is of no beneficial for us. Is my understanding correct..?

        1. Exit load is fully deducted if you exit before the 1 yr period . Its not on pro rata basis

      2. Anup says:

        I think the best option to avoid exit load is to stop the SIPs and then wait for atleast an year before redeeming the units.

  6. Tarun Aggarwal says:

    @ Manish – Suppose i have started a SIP for two years with the intention to withdraw money after two years. Now, in that case, I will have to pay the exit load on all the units purchased in the second year? And I will have to pay the STCP also on those units (purchased in the second year)??
    kindly correct me if i am wrong.

    Regards
    Tarun

    1. Tarun

      You are actually asking the same thing . Yes for any unit which has not completed 1 yr , you will have to pay exit loan , For if you got X unit on date D , you will pay exit load and short term capital tax (incase of profit) , if you sell it before D+365 days .

      Manish

  7. Tarun Aggarwal says:

    thanks Manish for the explanation.

    Tarun

  8. Ajay says:

    Tarun – Yes. For each month the units purchased have their own 1 year period for exit loads.

    1. Tarun

      Yes , Note that SIP is just a facility of monthly investment . Its not a POLICY or some kind of arrangement where the whole package as seen as a single thing . So each SIP payment is seperate and everything applies to them seperately .

      Manish

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