Exit loads on mutual funds: what they are and how to avoid paying them
Aeterna Wealth · figures from our fund data, updated 12 Nov 2026
An exit load is a charge for redeeming units within a set period after buying them, deducted from the money you receive. Most equity funds charge about 1% on units sold within 12 months; ELSS has a lock-in instead; liquid funds have a tiny graded charge for the first 6 days; arbitrage funds often charge about 0.25% within a month. Each SIP instalment has its own clock, so time your redemptions by the age of each instalment.
Typical exit loads
- Equity funds (large, mid, small, flexi cap and similar): usually 1% within 12 months; some use 6 months or a graded scale.
- ELSS: no exit load, but a 3-year lock-in.
- Liquid funds: a small graded load (a few thousandths of a percent) for redemptions within 6 days, then nil.
- Arbitrage funds: commonly about 0.25% within 15 to 30 days.
- Index funds: often nil or a small load for a few days or weeks.
- Debt funds: often nil; some charge for short periods. The scheme document has the exact terms.
Where it catches people out
- SIPs: each instalment is a separate purchase. Redeeming everything after 13 months of SIP still charges the load on the last 12 instalments.
- Switches between funds, and Regular to Direct, count as a redemption, so the load applies.
- STPs and SWPs are a series of redemptions; transfers out of units still inside the load period are charged.
- Units go out first in, first out: the oldest units are sold first.
How it works with tax
The load is deducted from the redemption value, so your capital gain is worked out on what you actually receive. It is a cost on top of any tax. The load goes back into the scheme for the remaining investors, not to the fund house's profit.
How to avoid it
- Check the load period before redeeming; waiting a few weeks often removes it, and after 12 months the gain also becomes long-term.
- Redeem the older units: if you need part of the money, the oldest units leave first and are usually out of the load period.
- For money you may need soon, use liquid or arbitrage funds rather than equity funds.
Common questions
Is exit load charged on gains or on the whole amount?
On the redemption value of the units sold within the load period, whether or not they made a gain.
Does exit load apply to SIP?
Yes, to each instalment separately, counted from that instalment's date.
Where do I find a fund's exit load?
In the scheme information document and on the fund's factsheet; it can change, and the terms when you invested apply to those units.
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General information, not investment or tax advice for your situation. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
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