Introduction

In India, mutual fund investment through a Systematic Investment Plan (SIP) is gaining popularity as a means of wealth creation. However, a change in financial goals, fluctuation in market conditions, or just an urgent need for liquidity could lead you to take one action or another within a mutual fund. In the Indian context, "cancelling a mutual fund investment" typically means cancelling the existing SIP (Systematic Investment Plan) for no more deductions or redeeming existing units of a mutual fund scheme in order to exit or cancel completely. SEBI has released new rules for processing all cancellations by the 2025 financial year. Thereafter, cancellations will be processed in a much shorter timeframe, typically within two working days. This article will explain how to enable you to have an orderly process to assist you in managing the investment.

Understanding Cancellation Options

Before getting started, it's essential to have a clear understanding of what cancellation means to you. Cancelling an SIP stops future auto-debits while retaining your accumulated units. Redeeming units means selling them back to the Asset Management Company (AMC) for a cash payment. You can also pause an SIP temporarily for 3–6 months if your financial crunch is short-term. Be cautious with schemes like Equity-Linked Savings Schemes (ELSS), which have a mandatory three-year lock-in under Section 80C for tax benefits.

SIP vs. Redemption: Key Differences

SIP Cancellation: Stops future contributions; your existing units remain invested.

Redemption: Retrieve all or part of your investment after taxes or exit loads.

Pause SIP: Stay invested in a short time frame, which is valuable for short-term cash flow strategies.

Cancel SIP online

It's easy to cancel your SIP online, and you do it through the AMC portal or app.

Three steps to cancel SIP online

Step 1: Log In: Use your folio number, PAN, and any other registered information to get into your investment platform or AMC website.

Step 2: Find SIPs: Head to either "Transactions" or "SIP Management" to see the plans you have active.

Step 3: Select and Cancel: Select the SIP you want to cancel and hit "Cancel SIP." You have to provide a reason you are cancelling per the 2025 transparency guideline set by SEBI.

Acknowledgement: Once you have submitted the request, a reference number will be shared with you to track your request.

Turnaround Time: According to SEBI guidelines, cancellation will be done within T+2 working days, and there is no follow-up required on your bank's auto-debit after the cancellation is made.

Although this method is designed to ensure no further payments will happen, you remain with the current units in the investment.

Cancelling SIP Offline

If you prefer to go this route or feel that it may be easier, you can cancel it offline.

Steps for Cancelling Offline

• Request a SIP cancellation form from your respective AMC branch or Registrar and Transfer Agent (RTA) office.

• Enter your folio number, name of the scheme, SIP Amount, bank account details, and date of cancellation.

• The signed form must be sent, along with a copy of your PAN or KYC documents, to the AMC or RTA branch, or you must authorise your distributor to send it on your behalf.

• Next, inform your bank to revoke the ECS/NACH authorisation to stop automatic payments.

This process normally takes 10-15 days; however, new SEBI rules effective in 2025 can expedite the timeframe.

The Redemption Process

You will have to redeem your units for cash to close your mutual fund plan.

Here's the Steps

Access to the portfolio: Go to the "Portfolio" area of your AMC's app or website and sign in.

Choose the fund: Choose the fund you want to redeem, and then click the redeem button.

Enter the amount: Specify the number of units you would like to redeem (you can redeem a partial amount).

Check NAV: Review the NAV you are redeeming, and then click "Submit.” Once you have verified the order, please click on "Submit."

Refunds: Money will be credited to equity schemes in 1-3 business days and to debt funds in up to 7 days.

Watch for Exit Loads

Be aware of exit loads (usually 1% if redeemed within a year) - check first! ELSS funds, for instance, are locked for three years per instalment.

Financial Considerations Before Cancellation

Canceling a SIP can turn your rupee-cost averaging experience upside down, as you will stop purchasing units when the market experiences dips. When redeeming, please note the tax consequences:

1. Flat fee for Short-Term Capital Gains is 20% if you cancelled an equity fund and owned it for less than a year.

2. You need to only pay taxes on the amount you redeemed over ₹1.25 lakh per year, i.e., 12.5% on the total, if you cancelled before experiencing a complete year.

Consult with your financial advisor to determine whether it would be better to transfer to a scheme or cancel the SIP.

Conclusion

An Indian mutual fund can be effortless to cancel, whether you want to terminate a SIP or redeem your investment units online or in person. Watch the markets over the next months, keep yourself informed of developments, and make better decisions about reinvesting the money, so you can stay on the wealth-building track you have started.

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