Exit Load

Exit Load is a fee charged by mutual-fund schemes when an investor redeems (or switches out of) units before a specified holding period from the date of each purchase. It is designed to discourage short-term redemptions and protect the remaining long-term investors in the scheme from the transaction and impact costs generated by early exits.

Exit load is expressed as a percentage of the redemption value (NAV × units redeemed) and is deducted from the redemption proceeds before disbursement to the investor. Critically, the deducted exit load amount is not retained by the AMC — it is credited back into the scheme's NAV, thereby benefiting the remaining investors. SEBI mandated this treatment in its Master Circular (June 2024). (Source: SEBI Master Circular for Mutual Funds, June 2024; sebi.gov.in.)

SEBI cap: Exit load on any mutual-fund scheme is capped at 1% of redemption proceeds. No scheme may charge an exit load higher than 1%. (Source: SEBI Master Circular, June 2024; sebi.gov.in.)

Typical exit load structures by category (2024):

• Equity funds (large cap, mid cap, flexi cap, sectoral): 1% if redeemed within 12 months from date of each purchase; 0% after 12 months.
• Liquid funds: Graded exit load in the first 7 business days only — declining from 0.0070% on Day 1 to 0.0045% on Days 6–7; 0% from Day 8. (Source: SEBI Circular SEBI/HO/IMD/DF3/CIR/P/2019/249; sebi.gov.in.)
• Overnight funds and money-market funds: 0% exit load.
• ELSS funds: 0% exit load — the mandatory 3-year lock-in replaces the exit-load mechanism.
• Some hybrid / balanced advantage funds: 1% within 12 months; some schemes have a tiered structure (e.g., 1% within 6 months, 0.5% between 6–12 months).
• Thematic and sectoral funds: Often 1% within 12–15 months; check the SID for the specific scheme.

Per-instalment exit load for SIP investors:
For investors with a running SIP, exit load is not applied to the aggregate holding — it is applied per instalment using FIFO (First In, First Out) redemption accounting. Each monthly SIP instalment starts its own holding-period clock. Practical implication: if you have been running a monthly SIP for 15 months and redeem your entire holding, the first 3 months of instalments (which are over 12 months old) have zero exit load; the most recent instalments (under 12 months) attract the 1% exit load. (Source: SEBI Master Circular, June 2024; AMFI investor FAQ; amfiindia.com.)

INR example — exit load on a partial redemption:
You invested ₹5 lakh in a flexicap equity fund with 1% exit load within 12 months. At month 9, NAV growth has increased your holding to ₹5.6 lakh. You redeem ₹1 lakh of units.

• Exit load = 1% × ₹1,00,000 = ₹1,000
• Redemption proceeds = ₹1,00,000 – ₹1,000 = ₹99,000
• The ₹1,000 exit load is credited to the scheme's NAV, not the AMC.
• STCG tax (20%) then applies on the capital gain in the redeemed units.

If you wait 3 more months (past the 12-month mark), exit load is zero and the gain qualifies for LTCG treatment (12.5% above ₹1.25 lakh annual exemption). (Source: Income Tax Act, 1961, Section 112A as amended by Finance Act 2024; incometax.gov.in.)

Exit load disclosure requirements:
The exit load for each scheme must be disclosed in the Scheme Information Document (SID), the Key Information Memorandum (KIM), and the fact sheet. Investors should check the current SID on the AMC's website before transacting, as AMCs can modify exit load structures with 30 days' notice to unitholders. (Source: SEBI Master Circular, June 2024; sebi.gov.in.)

Checking exit load before switching:
A switch from one scheme to another within the same AMC is treated as a redemption from the source scheme and a purchase in the target scheme. Exit load is assessed on the source scheme's redemption. The AMFI Monthly Fact Sheet and AMC websites publish the current exit load for each scheme. (Source: amfiindia.com — Monthly Fact Sheets; SEBI Master Circular, June 2024.)

Related terms: NAV, TER, Direct vs Regular Plan, STCG, LTCG.

Disclosure: MintByte is an AMFI-registered mutual fund distributor (ARN-314872) and an APMI-registered Authorised Person of Motilal Oswal Financial Services (APRN-01658). Content is educational.