SIP Stopped? Here's What Happens to Your Mutual Fund

“I stopped my SIP. Is my money gone?”

This is one of the most common fears among first-time mutual fund investors.

Stopping your SIP (Systematic Investment plan) does NOT mean your entire investment disappears. But it can impact your future returns, goal planning, and tax benefits.

Let’s bust the myths and understand the facts.

What Happens to Your Existing Investment?

• Your invested amount stays intact in the mutual fund scheme.
• It will continue to earn returns based on the fund’s performance.
• The fund house does not penalise you for stopping the SIP.

So, even if you stop the SIP, your previous investments are still active unless you redeem them.

Will It Affect Returns?

Yes – but only future returns. Here’s how:

• SIP helps in rupee-cost averaging. By stopping it, you lose this advantage.
• If markets fall after you stop the SIP, you miss the chance to buy units at a lower NAV.
• Your overall CAGR (compounded annual growth rate) may slightly drop over time.

🔁 A long break in SIPs can affect your wealth compounding – especially in equity Mutual Funds.

Common Misconceptions

Myth 1: My money is lost if I stop SIP.

❌ False. Your money is still growing in the mutual fund.

Myth 2: I will be charged for stopping SIPs.

❌ There are no exit penalties just for stopping the SIP. But watch for exit load (explained below).

Myth 3: SIP means I have to invest monthly without fail.

❌ SIPs are flexible. You can pause or stop anytime.

What If I Temporarily Pause My SIP?

Most platforms today allow you to pause your SIP for 1–6 months.

• During the pause, no amount is debited.
• Once resumed, you can continue with the same amount or change it.
• No penalty, no fine, no need to start a new folio.

Will There Be Any Tax Implications?

tax on Mutual Funds is applicable only at the time of Redemption, not when you stop the SIP.

• Equity Funds: 10% LTCG tax if gains exceed ₹1 lakh after 1 year.

• Debt fund (Post-April 2023 rules): Entire gain is taxed as per slab rate.

So, simply stopping the SIP doesn’t trigger tax – unless you withdraw your investment.

Exit Load: Be Careful Before Withdrawing

If you plan to redeem your units after stopping SIP, check for exit load:

• Equity funds usually have a 1% exit load if withdrawn within 1 year.
• Debt funds may have different rules.

✅ Your existing investment keeps growing. Don’t rush to withdraw unless you need funds.

Will It Impact My Financial Goals?

Yes, especially if:

• You stop the SIP without increasing the amount later.
• You do not reinvest or compensate later.

Use a goal-based calculator to see the gap and how to fill it by increasing SIP amount later or making lump-sum top-ups.

Pro Tips If You’re Planning to Stop SIP

• Pause, don’t stop – if it’s temporary.
• Use step-up SIPs later to make up for the break.
• Track your goal regularly – delays in investment can cost you lakhs.
• Don’t panic-sell. Let your existing investment grow.
• Switch to another fund only after proper evaluation.

Final Words

Stopping your SIP isn’t the end of your mutual fund journey. It just means you’re pressing pause on future contributions, not on the growth of what you’ve already invested.

Understand the implications, and make a comeback when your cash flows improve. SIPs are flexible – use that to your advantage.

Want to restart your SIP or build a better Portfolio? Start with a simple plan and automate your growth.