Dhaval Kapadia, Director, Portfolio Specialist, Morningstar Investment Adviser (India) answers queries in The Financial Express, from where the below has been taken.
At the time of opening my SIP account, I had mentioned the time period as 5 years. Now I want to withdraw some money. Can I do that without paying any penalty?
– Kunal Srivastava
The Systematic Investment Plan, or SIP, route and withdrawal (redemption) are two separate mandates.
There is no penalty for withdrawing from a fund in which one is investing through the SIP mode.
However, an exit load may be charged for redeeming before a stipulated period.
In case of investment through SIP, every instalment is treated as fresh purchase. Thus, the exit load charged will depend on the holding period of each instalment. If one is investing an amount of Rs 1,000 through monthly SIP in a fund that charges an exit load of 1% for holding period less than 1 year and now wants to withdraw towards end of 2 years, then investments made in the first 12 months will not attract exit load. Investments made after 12 months will attract the 1% exit load.
Withdrawal from a plan does not automatically stop the SIP. Your SIP instalments into the fund will continue and fresh units will continue to be purchased as per the stated mandate, even as you withdraw from the fund.
If you do not want to continue with the SIP, then you would need to separately request for its cancellation.
