Free exit gives you an option of quitting the seat even without visiting the allotted college. And you will still not be penalised for not joining or reporting to college. Under normal circumstances, to quit an allotted college, you need to report and then resign during a specified time frame or else you will be penalised and the security deposit might not be returned. But due to free exit option, you will not be penalised even if you do not report to the college. You can still opt for 2nd round of counselling. So you just don;t report to the allotted college in the first round and fill in the choices and lock them for 2nd round. And you will not be penalised.