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Systematic Investment Plans (SIPs) are a popular way to invest in mutual funds. But what if you need to withdraw your SIP amount? Knowing how to withdraw money from your SIP is crucial, whether for an emergency or for fulfilling a financial goal.
In this blog, we will guide you through withdrawing your SIP amount, answer common questions, and provide valuable tips to make the process smooth and hassle-free.
What is a SIP Withdrawal?
A SIP (Systematic Investment Plan) withdrawal is when you take money out of your SIP investments. SIPs allow you to invest a fixed amount regularly in mutual funds, helping you build wealth over time.
You sell some or all of your accumulated units when you withdraw from your SIP. This process can be done online or offline, depending on your preference. Knowing the rules and steps involved in withdrawing SIP amounts is essential to avoid any issues.
Reasons for Withdrawing SIP
You should withdraw money from your SIP for various reasons.
- Change in Risk Appetite: Your risk tolerance might change over time based on your financial situation. In such a case, you can withdraw the SIP amount and invest according to your risk appetite.
- Emergencies: In case of emergencies like medical expenses or urgent repairs, you may need the fund.
- Financial Goals: You might also withdraw to meet planned financial goals, such as paying for education, buying a house, or vacationing.
- Market Fluctuations: Some investors withdraw when they feel the market is not performing well and want to reinvest later.
- Consistent Underperformance: The mutual fund fails to meet your expectations and deliver the desired results. But before withdrawing, you might check if the underperformance is temporary due to market conditions or a long-term issue.
Whatever the reason, understanding the withdrawal process ensures you can access your money when you need it most.
How to Withdraw SIP Amount
Below are the steps to withdraw your SIP amount conveniently online and offline with the straightforward steps.
Steps to Withdraw SIP Amount Online
Withdrawing your SIP amount online is easy and convenient. Follow these simple steps:
Step 1 Log In: Visit the mutual fund or AMC website where you have your SIP. Log in using your user ID and password.
Step 2 Select SIP: Go to the section that shows your investments. Select the SIP from which you want to withdraw.
Step 3 Choose Withdrawal Option: Click on the option to redeem or withdraw. You may have to choose between a complete withdrawal or a partial withdrawal.
Step 4 Enter Details: Enter the amount or the number of units you wish to withdraw. Confirm your bank details where the money will be credited.
Step 5 Submit Request: Review your request and submit it. You’ll get a message or email to confirm.
Step 6 Receive Funds: The money will be credited to your bank account in a few days, depending on the processing time of the mutual fund.
Steps to Withdraw SIP Amount Offline
Withdrawing your SIP amount offline involves a few additional steps. Here’s how:
- Visit the Fund Office: Go to the mutual fund or AMC office where you have your SIP.
- Collect Form: Ask for a SIP withdrawal or redemption form.
- Fill Out Form: Fill in the required details, such as your name, folio number, and the amount you wish to withdraw.
- Attach Documents: Attach any necessary documents for bank verification, like a copy of your PAN card and a cancelled cheque.
- Submit Form: Submit the completed form and documents to the office. Ensure you get an acknowledgement receipt.
- Receive Funds: The funds will be processed and credited to your bank account in a few days.
Following these steps, you can easily withdraw your SIP amount online or offline.
Also Read: How to Stop SIP Online
Is Mutual Fund and SIP Same Regarding Withdrawal?
No, withdrawals of Mutual Funds and SIPs are not the same. While both offer withdrawal facilities, SIPs have a unique redemption structure where each instalment follows taxation rules and its exit load.
A Systematic Investment Plan, or SIP, is a way of investing in mutual funds occasionally, i.e., weekly, monthly, quarterly, etc. Every SIP instalment is considered a new investment and has a holding period. If there is an exit load, it applies to individual SIP units. You can stop the SIP anytime, but the invested amount will remain until redeemed.
On the other hand, if you invest in a lump sum, you can redeem your whole investment or a part of it at any moment. Generally, Withdrawals depend on the kind of mutual fund. For instance, an ELSS comes with a mandatory 3-year lock-in period. Equity Mutual Funds may have a short-term capital gains tax and exit load if held for less than a year. Debt mutual funds have different taxation rules that are applicable based on the holding period.
Difference Between SIP and Mutual Fund Regarding Withdrawal
There are several differences between mutual funds vs SIPs, including investment value, form, market volatility, etc. However, the table below highlights the significant differences between SIPs and mutual funds, specifically in terms of withdrawals.
| Point of Distinction | SIPs | Mutual Fund |
| Exit Load | This applies to each SIP instalment separately | May apply |
| Withdrawal Type | Full or Partial | Full or Partial |
| Taxation | Each SIP instalment has its holding period | Based on holding Period |
| Redemption Charges | Comparatively Lower | Higher |
Key Considerations Before Withdrawing
Before withdrawing the SIP amount, one has to consider the following factors:
Exit Load and Fees
Before withdrawing your SIP amount, check for any exit loads or fees. An exit load is a small charge the mutual fund deducts if you cancel your investment before a certain period, typically one year. This fee can reduce the amount of money you receive.
Always check the specific terms of your mutual fund to understand any exit loads or additional fees. Knowing this can help you avoid unexpected charges and better plan your withdrawal.
Tax Implications
You may need to pay taxes on the gains when you withdraw from your SIP. If you sell your units within three years, the profits are seen as short-term capital gains and are taxed. If you sell after three years, the gains are seen as long-term and are taxed at a lower rate.
Understanding the tax implications is crucial because it affects the final amount you receive. Consult a tax advisor if you need clarification on the tax rules.
Impact on Investment Goals
Withdrawing money from your SIP can impact your long-term financial goals. SIPs are designed to help you build wealth over time. If you withdraw too soon or frequently, you may not achieve your investment targets, such as saving for retirement, buying a house, or funding education.
Always consider whether the withdrawal aligns with your financial goals. Plan your withdrawals carefully to ensure they don’t derail your plans.
Can You Withdraw SIP Anytime?
Yes, you can withdraw your SIP amount before maturity. However, withdrawing early might incur exit loads, especially if done within a year. Check the specific terms of your mutual fund for any charges. Early withdrawal also means you may miss out on potential future gains, as SIPs are designed for long-term growth.
You have the option to either partially or wholly withdraw your SIP amount. A partial withdrawal means taking out only a portion of your investment, allowing the rest to continue growing. This can be useful in emergencies without disrupting your entire investment plan.
A complete withdrawal means taking out all your invested money, which might be necessary for significant expenses but could impact your long-term financial goals. Decide based on your immediate needs and plans.
How SIP Calculator Helps You Estimate Returns
If you’re doubtful about when to withdraw or how much to expect from your SIP investment, an SIP calculator can be helpful. A SIP calculator can help you to calculate the possible returns on your investments based on different parameters like the investment amount, expected rate of return, and time. Use Stack Wealth’s SIP calculator to plan your investments more efficiently, and it will give you a clear picture of the returns you might get when you withdraw.
Conclusion
Withdrawing your SIP amount is straightforward if you understand the process and implications. Always consider the exit load, taxes, and your financial goals before making a withdrawal. Whether you withdraw online or offline, follow the steps to ensure an easy process. Being informed will help you make the best decisions for your investments.
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