How to redeem a mutual fund on Coin

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Mutual fund units held on Zerodha Coin are in demat form in your CDSL account. Redeeming them requires a CDSL authorisation step that is unique to demat-held units and does not apply to statement-of-account (SOA) folios. This guide walks through the complete redemption process on Coin, including cut-off time rules and payout timelines.

Prerequisites

  • An active Zerodha trading and demat account with complete KYC.
  • Mutual fund units already held in your Coin portfolio.
  • CDSL TPIN set up, or access to the mobile number registered with CDSL for OTP authorisation. Set up the TPIN at cdsl.com if not already done.
  • TOTP authenticator for Zerodha two-factor login.

Regulatory framework for redemptions

Under the SEBI (Mutual Funds) Regulations, 1996, AMCs are obligated to honour redemption requests from investors at the applicable NAV. SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2019/137 (November 2019) governs mutual fund units held in demat form. When units are in demat form, the depository participant (Zerodha, through CDSL) must authorise the transfer of units to the AMC before the redemption can be processed. This is handled through CDSL’s TPIN or OTP mechanism, which serves as an electronic equivalent of a delivery instruction slip (DIS).

The NAV applicable to a redemption order is governed by the cut-off time rules in SEBI’s Master Circular for Mutual Funds:

  • Equity, hybrid, and fund-of-funds: Redemption orders received with payment authorisation before 3 PM IST on a business day receive that day’s NAV.
  • Liquid and overnight funds: Redemption orders received before 1 PM IST on a business day receive the previous business day’s NAV; orders after 1 PM receive the current business day’s NAV. (Confirm exact timings in the fund’s SID, as SEBI may update these rules.)

Step-by-step procedure

Step 1: Log in to Coin

Navigate to coin.zerodha.com on a desktop browser or open the Coin mobile app. Enter your Zerodha client ID, password, and TOTP. The Coin dashboard opens to your portfolio summary.

Step 2: Go to Holdings

From the left navigation menu, go to Portfolio > Holdings. This page lists all mutual fund schemes in which you hold units, along with current NAV, units held, invested amount, current value, and unrealised gain or loss.

Step 3: Open the fund detail page

Click the name of the fund you wish to redeem. The fund detail page opens, showing:

  • Units held
  • Average NAV (purchase price per unit)
  • Current NAV
  • Gain/loss amount and percentage
  • Day’s NAV change

Review the unrealised gain or loss before proceeding. If you are planning the redemption for tax reasons (for example, booking LTCG before Rs 1.25 lakh threshold), check the gain figure and the acquisition date to confirm the holding period.

Step 4: Initiate the redemption

Click the Redeem button. A redemption drawer opens with the following options:

Full redemption: Select “Redeem All” to redeem all units in that scheme.

Partial redemption by amount: Enter a rupee amount. Coin will calculate the approximate number of units at the current NAV. The actual units redeemed will be calculated at the cut-off NAV applicable to your order.

Partial redemption by units: Enter a specific number of units to redeem.

The minimum redemption amount or units is set by the AMC in the scheme’s SID. Most equity funds allow a minimum redemption of Rs 500 or one unit. Some schemes require a minimum remaining balance after partial redemption.

Step 5: CDSL TPIN or OTP authorisation

Because mutual fund units on Coin are held in your CDSL demat account, redeeming them involves a demat debit instruction. SEBI mandates that demat account holders authorise securities debits electronically.

Coin redirects you to CDSL’s EASIEST (Electronic Access to Securities Information and Execution of Secured Transactions) portal or displays an OTP prompt:

TPIN authorisation: Enter your CDSL TPIN (a 6-digit PIN set by you at cdsl.com). This authorises CDSL to debit the specified units from your demat account.

OTP authorisation: If you have not set a TPIN, select the OTP option. CDSL sends a 6-digit OTP to your mobile number registered with CDSL (which may differ from your Zerodha-registered mobile). Enter the OTP within the validity period.

If you have not set a CDSL TPIN, do so at cdsl.com > EASIEST before attempting a redemption for a smoother experience.

Step 6: Review and confirm

After authorisation, a summary screen displays:

  • Scheme name
  • Redemption amount or units
  • Approximate NAV (the exact NAV will be determined at cut-off time)
  • Estimated payout date
  • Redemption order reference number

Review the details and click Confirm. Coin submits the redemption order to the BSE StAR MF platform (the order routing platform used by Coin).

Step 7: Track order status

The redemption order appears in Coin under Portfolio > Orders with a status of “Processing” until the AMC processes it. The order status updates to “Successful” after unit debit and NAV application.

Step 8: Receive payout in bank account

Redemption proceeds are credited to your primary bank account linked to your Zerodha account (the account from which you made the original investment). The payout timeline:

  • Equity, hybrid, ELSS, and most debt funds: Proceeds credited within T+2 to T+3 business days from the applicable NAV date.
  • Liquid and overnight funds: Proceeds typically credited on T+1 business day.
  • ELSS (Equity Linked Savings Scheme): Redemption is only possible after the mandatory 3-year lock-in period. Attempting to redeem before lock-in expiry will result in an error.

The exact credit timeline depends on the AMC’s settlement schedule and your bank’s processing time.

Exit loads

Most equity funds charge an exit load for redemptions within 12 months of purchase (commonly 1% of the NAV). Index funds, liquid funds, and overnight funds typically have zero or nominal exit loads. Check the fund’s SID for the exit load schedule before redeeming, as the exit load is deducted from the NAV and reduces your payout.

Exit load details are displayed on the fund detail page in Coin and in the AMC’s scheme information document.

Tax implications of redemption

Every redemption event is a taxable event under the Income Tax Act, 1961. The gain or loss on each lot of units is calculated separately:

  • Equity-oriented funds (more than 65% in equities): Short-term capital gain (STCG) at 20% for units held less than 12 months; long-term capital gain (LTCG) at 12.5% on gains exceeding Rs 1.25 lakh per financial year for units held 12 months or more, per Finance Act 2024 (effective 23 July 2024). Indexation benefit is not available.
  • Debt-oriented funds (purchased on or after 1 April 2023): Gains taxed at applicable income tax slab rates as short-term capital gains, regardless of holding period, per Finance Act 2023.
  • Debt funds purchased before 1 April 2023: Subject to the grandfathering rule for LTCG; gains on units held for more than 36 months may qualify for LTCG with indexation at 20% under the old rules, or 12.5% without indexation under the Finance Act 2024 amended rates – investors should consult a tax adviser on the applicable provision.

The Securities Transaction Tax (STT) is applicable on equity mutual fund redemptions at 0.001% of the redemption value. See Securities Transaction Tax for details.

Zerodha Console provides a tax P&L statement with capital gains computation per scheme per lot, which can be used for ITR-2 filing.

What can go wrong

CDSL TPIN forgotten or not set: Without a valid TPIN or OTP, the demat debit cannot be authorised and the redemption will not proceed. Reset the TPIN at cdsl.com, or use the OTP option.

OTP sent to wrong mobile number: CDSL uses the mobile number registered with the depository, which may not match your Zerodha-registered mobile. If you have changed your phone number, update the CDSL-registered mobile through your broker’s back-office before attempting the redemption.

Redemption during ELSS lock-in: ELSS units cannot be redeemed within 3 years of each purchase date. Each SIP instalment has a separate 3-year lock-in from its investment date.

Exit load deducted: If you redeem within the exit load period, the exit load amount is deducted before payout. This is expected behaviour, not an error.

Market holiday delays: If the redemption is placed after cut-off time or on a non-business day, the applicable NAV shifts to the next business day, delaying payout by one day.

Partial redemption minimum not met: Some funds require a minimum residual balance. If your partial redemption would leave fewer units than the fund’s minimum balance requirement, the fund may reject it.

References

  1. SEBI (Mutual Funds) Regulations, 1996, as amended.
  2. SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2019/137 dated 12 November 2019 – Holding of Mutual Fund Units in Demat Form.
  3. SEBI Master Circular for Mutual Funds (latest version on sebi.gov.in).
  4. CDSL EASIEST System – cdsl.com.
  5. Finance Act 2023 – Debt mutual fund taxation.
  6. Finance Act 2024 – Revised LTCG/STCG rates, effective 23 July 2024.
  7. Income Tax Act, 1961, Sections 111A and 112A.
  8. Zerodha Coin support documentation (support.zerodha.com).

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

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