NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units

Pricing of Units: Entry and Exit Load Explained

Updated 11 October 2026 · Fact-checked

Units are bought and sold at prices linked to NAV. Since 1 August 2009, SEBI bans entry load, so the purchase price equals the applicable NAV. On redemption, an exit load is deducted: repurchase price = NAV × (1 − exit load %). Exit load is credited to the scheme, not to the AMC.

Understand Pricing of Units: Entry and Exit Load

A mutual fund unit is bought and sold at a price based on its Net Asset Value (NAV). NAV is the value of one unit, worked out from the scheme's assets less its liabilities, divided by the number of units outstanding.

In the past, a fund could add a charge on top of NAV when you bought. This was the entry load. It was often used to pay distributors. SEBI banned entry load for all schemes from 1 August 2009. So today the sale price (the price at which you buy units) is simply the applicable NAV. Distributors are paid through the scheme's expenses, and any extra fee for advice is agreed directly between the investor and the distributor.

On the way out, a fund may deduct an exit load. This is a percentage of NAV charged when you redeem units, usually if you redeem within a stated period. The repurchase price (the price at which the fund buys back your units) is NAV less the exit load. It can never be higher than NAV.

Exit load serves a purpose. It discourages short-term in-and-out trading, which forces the fund manager to sell holdings and raises costs for long-term investors. SEBI rules require that any exit load charged is credited back to the scheme, so it benefits the remaining unitholders. Under SEBI rules, a part of the load may be retained by the AMC to cover the cost of handling it, but only up to a limit set by SEBI, so check the workbook for the exact figure.

The exit load structure, its period and its percentage must be stated in the scheme documents. Load changes apply on a prospective basis, and investors must be informed. In the exam, expect a short rule question or a simple calculation of the redemption amount.

Key formulas to remember

Sale price (purchase price): Sale price = NAV + Entry load = NAV (entry load is nil); Entry load has been banned since 1 August 2009, so you pay the applicable NAV.
Repurchase price (redemption price): Repurchase price = NAV − Exit load = NAV × (1 − exit load %); Exit load is a percentage of NAV, not of the amount invested.
Redemption proceeds: Proceeds = Units redeemed × Repurchase price; Tax and other statutory deductions, if any, come on top of this.
Units allotted: Units = Amount invested ÷ Applicable NAV; With no entry load, the whole amount buys units (ignoring stamp duty on purchase).
Exit load treatment: Exit load is credited to the scheme; It benefits the continuing unitholders, subject to SEBI's permitted limit for AMC retention.

How to solve Pricing of Units: Entry and Exit Load questions

Use this method for any question on sale price, repurchase price, units or redemption proceeds.

1Identify what is asked: sale price, repurchase price, units allotted or redemption amount.
2Find the applicable NAV given in the question. Do not use any other NAV.
3For a purchase, set the sale price equal to NAV. Ignore any entry load mentioned, because it is banned.
4For a redemption, check whether the exit load applies. Compare the holding period with the load period in the question.
5If the load applies, compute repurchase price = NAV × (1 − load %). If not, the repurchase price equals NAV.
6Multiply by the number of units for the proceeds, or divide the amount by NAV for units.
7Check that the repurchase price is not above NAV and that the answer matches one option exactly.

Quickest way: Shortcut: price from NAV in one line

When to use it: Use this when the question gives NAV, a load percentage and a holding period, and you have to pick a number quickly.

Ask: buying or selling? Buying means price equals NAV.
Selling: is the holding period shorter than the load period? If not, price equals NAV.
If yes, take off the percentage: for 1%, subtract NAV ÷ 100.
Multiply by the units and compare with the options.

Common mistakes in Pricing of Units: Entry and Exit Load

Adding an entry load to NAV when the question describes a purchase.
Older textbooks and the sale price formula still show NAV plus entry load.
Fix: Remember that entry load is banned since 1 August 2009. Sale price equals the applicable NAV.
Applying exit load to the amount invested rather than to the NAV at redemption.
Students think of a load as a fee on the original investment.
Fix: Exit load is a percentage of the NAV on the redemption date. Use that NAV.
Charging exit load even after the load period is over.
Students overlook the holding period in the question.
Fix: Count the days or months held. If the period exceeds the load period, no exit load applies.
Thinking exit load is income for the AMC.
Load is confused with fees and commission.
Fix: Exit load is credited to the scheme, so it benefits unitholders, subject to SEBI's limit on AMC retention.
Swapping sale price and repurchase price.
Both terms are from the fund's point of view, which feels reversed.
Fix: Sale price is what the investor pays. Repurchase price is what the investor receives.

Worked examples

Example 1

An investor redeems 500 units of a scheme when the NAV is ₹40. The scheme has an exit load of 1% for redemption within one year. The units were held for 8 months. What are the redemption proceeds before any tax?

Show the solution

The holding period of 8 months is less than one year, so the exit load applies.
Exit load per unit = 1% of ₹40 = ₹0.40.
Repurchase price = ₹40 − ₹0.40 = ₹39.60.
Proceeds = 500 × ₹39.60 = ₹19,800.

Answer: ₹19,800

Example 2

An investor invests ₹50,000 in a scheme when the applicable NAV is ₹25. The scheme documents show no entry load. How many units are allotted, and what is the sale price per unit? (Ignore stamp duty.)

Show the solution

Entry load is banned, so sale price = applicable NAV = ₹25.
Units = ₹50,000 ÷ ₹25 = 2,000 units.

Answer: Sale price is ₹25 per unit and 2,000 units are allotted.

Exam tips

If an option shows a sale price above NAV for a fresh purchase, treat it as a trap, since entry load is banned.
Read the holding period carefully. Many questions add a load but make it expire before the redemption date.
Remember that the repurchase price is never above NAV, and the sale price now equals NAV.
Know where the exit load goes: it is credited to the scheme.
Work with the NAV on the redemption date, not the NAV at purchase.

Practice questions from Net Asset Value, Total Expense Ratio and Pricing of Units

Pricing of Units: Entry and Exit Load in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Pricing of Units: Entry and Exit Load: frequently asked questions

Is entry load allowed in mutual funds in India?

No. SEBI banned entry load for all mutual fund schemes from 1 August 2009. You buy units at the applicable NAV. Any fee for a distributor's advice is agreed directly between you and the distributor.

What is exit load and who gets it?

Exit load is a percentage of NAV deducted when you redeem units, usually within a set period. It is credited to the scheme, so it benefits the remaining unitholders, subject to SEBI's limit on what the AMC may retain.

How do I calculate redemption price with exit load?

Repurchase price = NAV × (1 − exit load %). For NAV ₹50 and 2% load, the price is ₹50 × 0.98 = ₹49. Multiply by the units redeemed to get the proceeds.

What is the difference between sale price and repurchase price?

Sale price is what you pay to buy units, and it equals NAV now. Repurchase price is what you receive when you redeem, and it equals NAV less any exit load.