Could you explain the tax implications of switching investments in Debt or Income funds from Regular plan to Direct plan after the exit load becomes nil? Some funds have an exit load upto three months, some up to six months and others upto one year.
A switch is a simultaneous redemption and purchase, so irrespective of exit load, the tax implication will be measured in terms of capital gains. If you withdraw investments before completing one-year, the gains will attract short-term capital gains tax payable as per the tax slab. The long-term capital gains on debt funds held for more than a year is liable for long-term capital gains tax. This will be either 10 per cent or 20 per cent after indexation plus applicable surcharge and education cess.