A systematic investment plan (SIP) is a tried and tested way of building wealth over time, saving investors the hassle of predicting market movements. However, life can be unpredictable. As an investor, you might have to pause or cancel SIPs for some of your mutual fund investments if you are short on funds. Else, you might have undertaken a portfolio rebalancing exercise and might need to close your SIP for some of your mutual funds. Whatever be the case, cancelling your SIP can be a daunting task as a lot is said about starting an SIP, but very little information is available about closing the SIP mandate. We have got your back. Read on to learn how to close SIP and the SIP cancellation charges associated with it.
Why do investors cancel or pause their SIP during the tenure?
India’s SIP inflows hit a whopping Rs. 25,323 crore in October 2024, according to the AMFI website. The steady growth in SIP inflow indicates investor dedication to long-term wealth creation. However, as an investor, there are multiple reasons why you would want to close your SIP. Some of the reasons why an investor would wish to close an SIP are:
- Financial crunch
- Portfolio rebalancing or re-evaluation of financial goals
- Market volatility
- Availability of other investment options
- Achievement of the financial goal
If you are wondering how to close your SIP, here’s a step-by-step guide.
How to stop SIP?
Stopping an SIP might sound difficult, but in fact it is a simple process. It is important to note that you might want to pause your SIP for a few months without stopping it completely. Pausing an SIP is also an option. Here are the ways in which you can stop or pause your SIP.
How to stop mutual fund SIP temporarily?
SIP pause allows you to temporarily suspend your investments without permanently terminating your plan. This is often preferable as it maintains your investment continuity and avoids the need to restart from scratch later.
Here is how to pause your SIP:
- Access your mutual fund account through the mutual fund company’s website or an investing app like Lemonn
- Go to the ‘manage SIP’ section
- Select the mutual fund SIP you wish to temporarily stop and click on the ‘Pause’ or ‘Stop’ option
- Confirm your request by providing essential details, such as the reason for the pause and the duration you’d like it to be in effect.
After submitting the request, your SIP will be temporarily suspended.
However, your ability to pause an SIP will depend on the fund house. Some fund houses do not allow you pausing an SIP and in this case, you will have to stop the SIP completely. Some fund houses have a cap on how many times you can pause an SIP and they may also have a limit on the number of months the SIP can remain paused.
It is important to note that if the ‘stop payment’ or low balance persists for over two months, the Asset Management Company (AMC) will cancel the SIP. This may result in a missed or briefly interrupted instalment.
Therefore, it’s advisable not to halt or skip SIP payments for an extended period, especially if permanent cancellation is not your intention. Maintaining regularity in payments ensures the stability and effectiveness of your investment strategy.
How to stop SIP online?
You can follow the steps listed below to cancel your SIP online:
Through the AMC website
• Log on to the AMC website
Visit the official website of the Asset Management Company (AMC) where your SIP is registered and log in with your credentials.
• Head to the SIP section
Go to the ‘SIP’ or ‘My Investments’ section.
• Select the specific SIP
Choose the specific SIP you want to cancel
• Cancel SIP
Click on the “Cancel SIP” option. Confirm your request, which may require you to provide a reason for cancellation.
• Processing Time
The cancellation will typically be processed within 14-21 working days.
Through the online distributor platform
• Log on to the distribution app used by you
If you invested through an online distributor (like Lemonn), log in to their platform.
• Access the SIP section
Find the SIP section where your investments are listed
• Cancel SIP
Select the SIP you wish to stop and click on the “Stop” or “Cancel” option.
• Confirmation
You should receive a confirmation message once the cancellation is processed.
Through KYC Registration Agencies (KRAs)
There are five prominent KRAs in India: CAMS KRA, KFin Technologies Limited KRA, NSDL KRA, NSE KRA, and CVL KRA. The process for SIP cancellation would be similar across KRAs. So, let us understand one of them for your convenience. Here is a step-by-step process to cancel SIP through KRAs.
• Log on to your KRA website
Login to your KRA (eg – CAMS or NSDL) website.
• Go to My Transaction section
Head to the My Transactions section, click on the SIP section
• Cancel the desired SIP
From the SIP section, click on the SIP you want to cancel and confirm
How to stop SIP offline?
You can follow the steps outlined below if you wish to stop your SIP offline:
• Obtain the SIP Cancellation Form
Visit the nearest branch of the Asset Management Company (AMC) where your SIP is registered. Obtain the SIP Cancellation Form. This form may also be available on the AMC’s website for download.
• Fill Out the Form
Complete the form with necessary details such as your folio number, PAN (Permanent Account Number), bank account number linked to the SIP, name of the mutual fund scheme, reason for cancellation (if required), etc.
• Submit the Form
Submit the completed form at the AMC branch or to a KRA like CAMS or KFin Technologies handling your mutual fund. Ensure you provide any additional documents that may be required, such as a copy of your ID proof and a cancelled cheque.
• Notify Your Bank (Optional)
Alternatively, you can inform your bank to stop the NACH (National Automated Clearing House) mandate associated with your SIP payments. This will halt all SIPs linked to that mandate. Note that if you stop the NACH mandate, it may affect multiple SIPs if they share the same mandate.
• Confirmation of Cancellation
After submitting your request, you should receive a confirmation from the AMC or registrar via email or post, confirming that your SIP has been successfully cancelled. The cancellation process typically takes about 14 to 21 working days.
No SIP cancellation charges or exit loads are applicable on SIP cancellations or pause via any method. However, if an investor fails to maintain sufficient funds in their bank account for SIP payments, the bank may impose penalties for failed transactions, which can range from ₹100 to ₹750 per occurrence.
Note: Pausing or cancelling an SIP will result in more amount not being invested in the mutual fund scheme. Cancellation will not result in redemption. You will have to redeem your units in case you want to encash your investment.
Conclusion
Investments are an important part of your personal finance journey. As an investor, you might have multiple active SIPs that seek to help you attain your financial goals. However, you might want to pause or cancel your SIPs due to financial difficulties or in case of portfolio rebalancing. You can cancel your SIPs online by visiting the AMC website or by logging on to your online distribution app. SIPs can also be cancelled offline by visiting the AMC office and filling the SIP cancellation form.
FAQs
What is the difference between a regular plan and a direct plan?
A regular plan involves investing in mutual funds through intermediaries like brokers, resulting in higher expense ratios due to distribution commissions, while a direct plan allows investors to buy units directly from the Asset Management Company (AMC), leading to lower expense ratios and potentially higher returns over time.
What are the fund categories under equity funds?
Equity funds are categorized into several types based on market capitalization and investment strategies, including:
1. Large Cap Funds: Invest primarily in large-cap companies.
2. Mid Cap Funds: Focus on mid-cap companies.
3. Small Cap Funds: Target small-cap companies.
4. Multi-Cap Funds: Invest across large, mid, and small-cap stocks.
5. Sectoral/Thematic Funds: Concentrate on specific sectors or themes.
6. Value Funds: Invest in undervalued stocks.
7. Contra Funds: Follow a contrarian investment strategy.
8. Focused Funds: Limit investments to a maximum of 30 stocks.
9. Dividend Yield Funds: Primarily invest in dividend-paying stocks.
10. Equity Linked Savings Scheme (ELSS): Offer tax benefits and invest primarily in equities.
What are tax-saver mutual funds?
Tax-saver mutual funds, also known as Equity Linked Savings Schemes (ELSS), are a type of mutual fund that offers tax deductions under Section 80C of the Income Tax Act, allowing investors to claim deductions of up to ₹1.5 lakh from their taxable income.
Can an investor stop all the SIPs at the same time?
Yes, an investor can stop all their SIPs at the same time, either online through the AMC’s website or by notifying their bank and respective AMCs offline. This process allows investors to cancel all ongoing SIPs or select specific ones as per their convenience without paying any penalty.
Is there any penalty charged for canceling an SIP?
Generally, no penalty is charged for canceling SIPs in mutual funds. However, if an investor fails to maintain sufficient funds in their bank account for SIP payments, the bank may impose penalties for failed transactions, which can range from ₹100 to ₹750 per occurrence.
How long can an SIP be paused?
A SIP can typically be paused for a period ranging from one month to six months, depending on the mutual fund house’s policies, with some allowing pauses for up to three months only.
Is the SIP cancellation form available with AMCs?
Yes, the SIP cancellation form is available with Asset Management Companies (AMCs). Investors can request this form at the AMC’s office or download it from the AMC’s website, fill it up, and submit for processing their SIP cancellation.
