PMS exit load
At most 3%, 2% and 1% of the amount redeemed in years one to three, and nothing after that.
An exit load is the charge a portfolio manager may deduct when a client takes money out early. SEBI caps it on a falling scale: at most 3% of the amount redeemed in the first year of investment, 2% in the second, 1% in the third, and nothing after three years.
The schedule is a ceiling, not a requirement. A PM may charge less or nothing, and whatever it does charge must be written into the agreement and the fee annexure before the client signs.
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SEBI's exit load caps
Master Circular 6.1.4.1, applying to part or full redemption:
| When the client redeems | Maximum exit load |
|---|---|
| Within the first year of investment | 3% of the amount redeemed |
| In the second year | 2% of the amount redeemed |
| In the third year | 1% of the amount redeemed |
| After three years from the date of investment | Nil |
Worked example
A client invested ₹75 lakh in a discretionary account. Fourteen months later they withdraw ₹20 lakh to fund a flat purchase.
- 1
Which year are they in?
Fourteen months from the date of investment is the second year.
- 2
The cap
2% of the amount redeemed: 2% of ₹20 lakh = ₹40,000 at most.
- 3
What the client actually pays
Whatever the agreement specifies, up to ₹40,000. If the agreement says 1% in year two, the charge is ₹20,000.
- 4
If they had waited
After the third anniversary of the investment, the same withdrawal carries no exit load.
Where the caps do not apply
- check_circleLarge value accredited investors: an accredited investor who has agreed to invest at least ₹10 crore. The quantum and manner of exit load are bilaterally negotiated, and the 3/2/1 caps do not apply (Master Circular 6.1.5).
- check_circleCo-investment portfolio management services (6.1.4.2).
Free account, this exam preselected.
Approved, not in force: the 2026 Regulations
SEBI's Board approved new Portfolio Managers Regulations, 2026 on September 24, 2026. The new mutual-fund-only route (PRIM) would have no exit load provisions; the Board's announcement lists no change to the 3%, 2%, 1% schedule for other PMS. Until the new Regulations are notified, the caps above apply.
Top-ups and the clock
SEBI's text measures the years 'from the date of investment'. How that applies to money a client adds later, for instance whether each top-up starts its own three-year clock, is set out in the PM's agreement and fee annexure. Read it before telling a client their exit is free.
Why the distributor should raise it first
Exit load is the fee clients forget until they need the money. A client who may need ₹20 lakh for a child's admission in eighteen months should hear about the 2% second-year cap before onboarding, not at redemption. Matching the investment horizon to the exit load schedule is part of a suitable recommendation, and the agreement must state the terms for early withdrawal of funds or securities.
How XXI-A tests this
Questions give a holding period and a redemption amount and ask for the maximum exit load. The traps: applying the percentage to the whole portfolio instead of the amount redeemed, applying the first-year rate in month fourteen, or assuming the caps bind a large value accredited investor. Another distractor states that exit load is 'mandatory'; SEBI only sets the maximum.
FAQs
What is the exit load in PMS?expand_more
A charge on early withdrawal, capped by SEBI at 3% of the amount redeemed in year one, 2% in year two, 1% in year three, and nil after three years.
Is exit load charged on the full portfolio or the amount withdrawn?expand_more
On the amount redeemed, whether the redemption is partial or full.
Can a PMS charge no exit load at all?expand_more
Yes. SEBI's schedule is a maximum. The PM may charge less or nothing, as stated in the agreement.
Is there an exit load after 3 years in PMS?expand_more
No. SEBI's schedule allows no exit load once three years have passed from the date of investment. The exceptions are large value accredited investors and co-investment services, where the caps do not apply.
Does the exit load cap apply to accredited investors?expand_more
It does not apply to large value accredited investors, those who agree to invest at least ₹10 crore; they negotiate exit load bilaterally. Other accredited investors remain under the caps.