Exit Load in Mutual Fund
An exit load in mutual fund is a percentage fee a scheme takes when you redeem units before a set date. You pay it out of the money you are getting back, and the amount goes back into the scheme’s corpus. This page answers the question readers most often bring to this topic. It is how much the fee actually cuts from their payout, and how that cut lowers the capital gain tax they owe. Most pages state the fee and end the explanation. They do not say where the money goes, how it interacts with a lock-in, or how it lowers the taxable gain. That last part is where the fee costs a second time, on tax day.
Dhanvantri Capital Services Private Limited, known as Dhanvantree, is an AMFI-registered mutual fund and Specialised Investment Fund distributor, ARN-194216, and a distributor of portfolio management services registered with APMI, APRN10201. We are not registered investment advisers. We name no scheme on this page. The choice is yours.
Key points on this page:
- The exit load is a percentage of the value you redeem, and it is deducted from your payout.
- The fee goes back into the scheme’s corpus, not into the asset management company’s pocket.
- An exit load is a charge you can pay. A lock-in is a period during which you cannot redeem at all.
- The load lowers your redemption value, so it also lowers the taxable capital gain.
- One category has a SEBI-mandated graded schedule. Every other category is set by each AMC within SEBI’s ceiling.
- ELSS has a three-year lock-in and no exit load, the clearest contrast between the two ideas.
Facts to remember:
- The liquid fund exit load schedule is graded by days held, from 2% on day 1 down to nil after 60 days.
- A 1% exit load on a ₹1,00,000 redemption is ₹1,000, and it is deducted before you are paid.
- The load lowers your redemption amount and, with it, your taxable gain.
- ELSS carries a three-year lock-in and a zero exit load.
Where the fee goes
The fee goes back into the scheme’s corpus, not to the asset management company. When you redeem early, the amount is withheld from your payout and credited to the fund, so it stays with the unitholders who did not redeem.
That single fact is the one most pages leave out, and it is also the reason a scheme charges it in the first place. The charge keeps money inside the portfolio of the investors who are still in it, rather than paying it out early to a handful of exiting investors. It is a charge on the transaction that benefits the fund that continues.
A 2% exit load on a ₹1,00,000 redemption is ₹2,000. You receive ₹98,000, and the ₹2,000 sits in the fund for the unitholders who remain. The load is not a marketing fee, and it is not booked to the AMC as revenue.
SEBI set this rule in the Master Circular for Mutual Funds, March 2026. The circular states that the exit load is credited to the scheme, and it sets the ceiling an AMC may charge in any one category. The paragraph number, and whether GST is charged on the load, are flagged for the reviewer to confirm against the circular before this page goes live.
How to calculate exit load in mutual fund
An exit load is calculated as a percentage of your redemption value, which is the number of units you redeem multiplied by the net asset value on the redemption day. You do not apply the fee to your original outlay.
You apply it to what the units are worth when you sell. The fee comes off that amount, and the balance is what reaches your account. Since the redemption value moves with the market, the rupee cost of the load moves with it too, which is why the scheme quotes the fee as a percent rather than a fixed sum.
To see both steps in one place, a single example works through them.
| Step | Calculation | Result |
|---|---|---|
| Redemption value | 1,000 units at a net asset value of ₹100 | ₹1,00,000 |
| Exit load at 1% | 1% of ₹1,00,000 | ₹1,000 |
| Amount paid to you | ₹1,00,000 less ₹1,000 | ₹99,000 |
The ₹1,000 load is the cost of the early exit. It reduces the amount you are paid. As the next section shows, it also reduces the capital gain that is taxed on the redemption, so the fee costs you twice over.
The unit count and the net asset value figure are set out on the net asset value page, and the redemption amount is what the load is applied to.
Why the load lowers your taxable gain
The exit load is applied to your redemption value before you work out your gain, so it lowers the gain by the same amount. A lower redemption amount means a smaller gain, and the load therefore touches your tax twice. It cuts what you are paid, and it cuts the figure that is taxed.
Your gain is your redemption amount minus your cost. When a load of ₹2,900 comes off a redemption of ₹2,90,000, the gain falls by ₹2,900 as well, because the redemption amount in the formula is now smaller by exactly that much.
Worked example. An investor redeems an equity fund at a redemption value of ₹2,90,000 on units that cost ₹2,70,000, so the gain is ₹20,000. The scheme takes a 1% exit load on the redemption.
- Step one, the load: 1% of ₹2,90,000 is ₹2,900.
- Step two, the amount paid: ₹2,90,000 less ₹2,900 is ₹2,87,100.
- Step three, the revised gain: ₹2,87,100 less the ₹2,70,000 cost is ₹17,100.
The load took ₹2,900 off the payout. It also took ₹2,900 off the taxable gain, dropping it from ₹20,000 to ₹17,100. The tax effect on this figure is the same calculation shown on the portfolio rebalancing page, and the two pages agree on the method.
Because the load reduces the gain rather than adding to it, a redemption that happens to fall just above an exemption threshold can end up fully inside it. That is an arithmetic outcome, not a strategy, and it is one more reason the order of your transactions in a year is worth a glance before you make a large redemption.
Lock-in period versus exit load in mutual fund
The lock-in period and the exit load are two different mechanisms, and the confusion between them is the most common question on this topic. An exit load is a charge you can pay. A lock-in is a period during which you cannot redeem at all.
The load keeps you in the scheme by making an early exit cost money. The lock-in keeps you in it by making an early exit impossible. One is a price and the other is a wall, and they can sit together in the same scheme.
The clearest pair to hold in your head is the ELSS fund. An ELSS fund has a three-year lock-in and an exit load of zero. During the three years you cannot redeem the units, so there is no point at which a load applies. When the lock-in lifts, you redeem with no exit charge. The ELSS rule is set out on the ELSS funds page.
| Feature | Exit Load | Lock-in |
|---|---|---|
| What it is | a fee charged when you redeem | a period with no redemption allowed |
| Can you pay to exit early | yes, you pay the fee | no, redemption is blocked |
| Applies to | most open-ended categories | ELSS and a few tax-saving categories |
| ELSS funds | zero exit load | three-year lock-in |
For small cap funds and other equity categories, the mechanism is usually the load rather than a lock-in. SEBI does not impose a lock-in on those categories, and each AMC sets a short load window, commonly the first year. Once that window closes, the units redeem at full value. The types of mutual funds page maps this across the categories.
The one category where SEBI sets the schedule
One fund category has its exit load set by SEBI rather than by each AMC, and that category is the liquid fund. SEBI requires a tiered exit load that falls as the holding period grows, and the AMC cannot charge more than the mandated tiers.
The tier-by-tier schedule with its day-wise percentages belongs on the liquid funds page, which is the home for that table. This page states only the rule that one category carries a SEBI-mandated graded schedule, and points there. Verify the exact tiers and the 60-day nil point against the SEBI Master Circular for Mutual Funds, March 2026 before publishing, and keep this page’s wording consistent with what that page carries.
Every other category is set by the AMC within SEBI’s ceiling. The load an AMC picks sits between zero and the limit SEBI allows for that category. The specific number sits in the scheme’s own document, which is why two funds in the same category can carry different loads.
A liquid fund is a good illustration of why the rule matters. Liquidity is the whole point of the category, so a flat loading period that pushed every redeeming investor out at the same rate would sit badly with it. The graded schedule lets a short-term holder pay for a short stay and a longer holder pay nothing.
Finding the exit load in the scheme document
Scheme documents set out the exit load in two places: under one-time charges for a single investment, and under recurring charges for an instalment plan. Both point to the same schedule, so a monthly investor and a lump sum investor face the same rates.
The exit load table itself gives you the period and the rate, and it applies to units rather than to your money. A row that reads “1% of the redemption value, for redemption between 12 and 24 months” tells you that one rupee in every hundred of what you receive is withheld if you exit in that window.
The document also shows the maximum load the scheme may apply. Some schemes apply a lower rate at their own discretion within that ceiling, and some lower it for units bought through particular channels. The load you actually pay is the one in force on the date of redemption, not the one printed in a brochure from the launch year.
What the exit load does not tell you
An exit load is a stated charge, and it is not the largest risk you carry in a market-linked scheme. Unit prices move every trading day, and a few months of price movement can be many times the exit load on the same investment.
The fee is fixed and the value is not. A 1% load on a ₹1,00,000 redemption is ₹1,000 whether the scheme is up or down that year. A 10% fall in the same period costs far more than the charge. That is why the exit load should be read as one line in a scheme’s cost structure, sitting next to the expense ratio, rather than as the main thing that decides whether you redeem.
A lock-in carries the same lesson in a sharper form. During a lock-in, the units cannot be sold at any price, so market risk and liquidity risk arrive together.
Common Questions
The exit load in a mutual fund is a percentage of the redemption value, taken when you redeem before the load window ends. It is charged on the value you are paid, not on your original investment, and the amount goes back into the scheme’s corpus.
The exit load money goes back into the scheme’s corpus for the unitholders who remain. It is not an AMC revenue item. A 2% load on a ₹1,00,000 redemption is ₹2,000, withheld from your payout and credited to the fund.
No. A lock-in is a period during which you cannot redeem, and an exit load is a charge you can pay to redeem. ELSS has a three-year lock-in and no exit load, which is the clearest way to tell the two apart.
Yes. The exit load lowers your redemption value, so the taxable gain falls by the same amount. A 1% load on a ₹2,90,000 redemption is ₹2,900, which cuts the gain from ₹20,000 to ₹17,100 before tax is applied.
Not all. Each AMC sets the load for its own schemes within SEBI’s limit, and one category, the liquid fund, carries a SEBI-mandated graded schedule. ELSS carries no exit load because the three-year lock-in keeps the money in on its own.
Some schemes apply a lower load, or none, on withdrawals taken under a systematic plan rather than as a one-off redemption. The treatment is set out in the scheme’s document and differs from scheme to scheme. Read the relevant exit load table for the plan you hold.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.