Investing through SIPs is a disciplined approach to regular investing. However, every SIP investment is treated as fresh investment. So, holding of each SIP unit will be treated differently and depending on the type of fund that you have investments in, long-term or short-term capital gains tax will apply.
Long-term capital gains, holdings of over one year from sale of equity-oriented mutual funds are tax-free. However, long-term capital gains tax on debt-based funds are taxable at 20 per cent on indexed capital gains or at 10 per cent on profit, whichever is lower.
If the SIP holdings are redeemed before completion of one year, then equity funds attract a 15 per cent short-term capital gains tax rate excluding surcharge and cess. In case of debt funds, the short-term capital gains are added to your income and taxed according to the tax slab you fall under.
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