Exit load

An exit load is a charge some schemes apply when units are redeemed or switched out within a stated period from purchase. It is a percentage of the redemption value, deducted before the money reaches you. The rate and the period are set by each scheme and published in its scheme documents.

Why it matters

Exit loads discourage short-term trading in schemes meant for longer holding, which protects long-term investors from the costs of frequent inflows and outflows. For you, they are a cost to factor in before redeeming, switching between schemes, or setting up an SWP or STP.

How to read it

• Exit loads are usually applied first-in, first-out. With an SIP, each instalment has its own purchase date, so older units may be past the exit-load period while recent ones are not.
• A switch from one scheme to another counts as a redemption and may attract an exit load.
• Equity schemes commonly have an exit load for the first year or so; liquid funds have only a small, graded charge for very short holding periods. Always check the specific scheme.

Common misconceptions

• “An exit load is a lock-in.” It is not. You can still redeem; you simply pay the charge. ELSS, by contrast, has a statutory lock-in during which you cannot redeem at all.
• “Exit load and tax are the same thing.” They are separate. Tax may apply to gains whether or not an exit load applies.

In India: Exit loads are scheme-specific and can change for future investments. The terms that apply to you are those in force when you invested; the latest terms are in the scheme information document.