Mutual Fund Exit Load Explained: FIFO Worked Example

"I redeemed my fund and got less than the value shown. Why was 1% cut?" That cut is the exit load: a fee for leaving a scheme before a holding period set in its offer document. It is calculated on the value of the units redeemed at that day's NAV, and because units leave first-in, first-out (FIFO), only the units still inside the load period are charged. Selling a few weeks later, or selling only older units, often brings the load to zero.

This guide explains how exit load works, the common structures as of October 2026, a FIFO worked example, and what to do if you think you were charged wrongly.

What exit load is, and why it exists

Exit load discourages short-term money from moving in and out of a scheme, which forces the fund manager to sell holdings and raises costs for everyone else. Three things to know:

• It is scheme-specific. The Scheme Information Document (SID) and Key Information Memorandum (KIM) state the load, and the factsheet repeats it. Two funds in the same category can differ.
• It goes back to the scheme. SEBI requires exit load collected to be credited to the scheme, net of GST, so it compensates remaining investors.
• It applies to units, not to your account as a whole. Each purchase, including every SIP instalment, carries its own date and its own load clock.

There is no entry load on mutual funds in India; SEBI abolished it in 2009.

Typical exit load structures (as of October 2026)

These are patterns, not rules. Always read the load for your exact scheme. The "12 months" versus "365 days" wording also matters on the boundary day; the SID says which one counts.

How the calculation works

Exit load = units redeemed inside the load period × NAV on redemption date × load %

The steps the registrar follows:

1. List every purchase lot (lumpsum, SIP instalment, switch-in) with date and units.
2. Redeem units starting from the oldest lot (FIFO).
3. For each unit, check whether it is still inside the load period on the redemption date.
4. Apply the load percentage to the redemption value of only those units.
5. Pay you the redemption value minus the load.

The NAV used is the redemption-day NAV, not your purchase NAV. A unit in loss still pays load if it is inside the period.

Worked example: exit load on FIFO units

Rohan holds an equity fund with a 1% exit load if redeemed within 12 months. His purchases:

On 20 October 2026 he redeems 1,600 units at a NAV of ₹55.

FIFO allocation:

• All 1,250 units from Lot A go first. Held about 14.5 months, past 12 months: no load.
• The remaining 350 units come from Lot B. Held about 8.5 months: load applies.

Calculation:

• Total redemption value: 1,600 × ₹55 = ₹88,000
• Value of units with load: 350 × ₹55 = ₹19,250
• Exit load: 1% × ₹19,250 = ₹192.50
• Amount paid: ₹88,000 − ₹192.50 = ₹87,807.50

If he had sold only 1,250 units, every unit would have come from Lot A and the load would be zero. Selling by units, not by a rupee amount, gives that control.

A timing trap: suppose he had redeemed 1,000 units on 25 July 2026 at a NAV of ₹53. Those units are from Lot A, but Lot A was then only about 11.8 months old. Load: 1% × (1,000 × ₹53) = ₹530. Waiting until after 1 August 2026 would have removed it, though the NAV could move either way in the meantime.

The same FIFO order also decides capital gains: Lot A units would be long-term and Lot B units short-term. See capital gains tax on mutual funds.

SIPs, switches, STPs and SWPs

• SIP: Every instalment starts its own clock. Redeeming the whole holding shortly after stopping a 12-month SIP means the latest instalments still pay load. Use the SIP calculator to see how instalments add up, and keep a list of instalment dates before you sell.
• Switch: Treated as a redemption from the source scheme, so its exit load (and capital gains tax) applies. This includes moving from the regular plan to the direct plan of the same scheme. Our guide to direct vs regular mutual funds covers when that switch is worth the cost.
• STP and SWP: Each transfer or withdrawal is a redemption, so recent units can attract load. Some schemes waive load on registered STPs; check the SID. See STP vs SWP.
• Free units: Some schemes let you redeem 10% or more of units each year without load. If yours does, it is stated in the SID.

How to reduce or avoid exit load

1. Check the load and your oldest purchase dates in the account statement or CAS before redeeming.
2. Redeem by units, choosing only as many as are past the load period.
3. Wait out the period if the cost of waiting is low and you do not need the money urgently.
4. Use free-unit allowances where the scheme offers them.
5. Keep short-term money in liquid or overnight funds, where loads are tiny or nil after a week.

If you think the exit load was charged wrongly

Errors are uncommon but do happen, for example when a switch-in date is recorded wrongly or units from a merged scheme lose their original dates.

1. Download the transaction statement showing units, NAV and load deducted.
2. Rebuild the FIFO calculation with your purchase dates, as in the example above.
3. Write to the AMC or registrar (CAMS or KFintech) with your calculation and ask for a lot-wise breakup.
4. Escalate to the AMC's investor service officer if the reply does not address your numbers.
5. File on SEBI SCORES at scores.sebi.gov.in. The AMC must submit an action taken report within 21 calendar days.
6. Use SMART ODR at smartodr.in if SCORES does not resolve it.

Sample request

Subject: Request for lot-wise exit load working, Folio [number]

On [date] I redeemed [units] units of [scheme name], folio [number], reference [number]. An exit load of ₹[amount] was deducted. As per my records, [number] of these units were purchased on or before [date] and were outside the load period. Please share the FIFO lot-wise working and refund any excess load deducted.

Name: [name], Registered mobile: [number]

Key takeaways

• Exit load is a fee for redeeming or switching before a scheme's holding period, applied to the redemption value at that day's NAV.
• Units leave first-in, first-out; only units still inside the period are charged.
• As of October 2026, 1% within 12 months is common for equity funds, liquid funds have a graded 7-day load, and ELSS has a lock-in instead of a load.
• Switches, including regular-to-direct, STPs and SWPs are redemptions and can attract load.
• Redeem by units and check purchase dates to keep the load at zero; dispute errors via AMC or registrar, investor service officer, SEBI SCORES and SMART ODR.