The Securities and Exchange Board of India (SEBI) has lowered the maximum permissible exit load for mutual funds from 5% to 3%, aiming to make investing simpler and more transparent for retail investors.
Exit load is the fee charged by mutual fund houses when investors redeem units or switch to another scheme within a specified period after purchase. It is applied as a percentage of the Net Asset Value (NAV) at the time of redemption.
The structure of exit loads depends on two key factors — the stipulated holding period and the percentage applied to the NAV. These details are outlined in each scheme’s Information Document (SID), enabling investors to know the terms upfront.
As per CBIC guidelines, fund houses must also pay 18% GST on the exit load collected.
Effectively, exit load functions like a penalty for early withdrawal, discouraging premature exits while promoting long-term participation in mutual fund schemes.