Exit Load
A fee deducted when mutual fund units are redeemed before a defined holding period.
Equity schemes commonly charge about 1% for redemptions within 365 days; liquid funds use a graded load for the first week. The load is applied on the redemption value, before tax.
Why Exit Load matters when comparing products
Exit loads are a crucial factor to consider when evaluating and comparing financial products in India, especially mutual funds. They represent a cost that can reduce the net returns received if units are redeemed prematurely. Understanding the specific exit load structure and holding period requirements of different schemes helps investors assess the true cost of liquidity and make informed decisions about fund selection based on their investment horizon and potential need for early access to funds.
Illustrative example
Suppose an investor redeems mutual fund units worth ₹1,00,000. If the scheme has an exit load of 1% for redemptions within one year, then ₹1,000 (1% of ₹1,00,000) would be deducted as an exit load. The investor would receive ₹99,000 before any applicable taxes on capital gains. This illustrates how the exit load directly impacts the final proceeds.