Tax and exit load on SIP investments

I have purchased ICICI Value Discovery Fund Regular growth-SIP last year in Nov 2014. I am a bit confused now, i had a call with customer care of ICICI Mutual Fund and they informed in case of SIP, there be will no tax and exit charges only if its redeemed after one year of your last SIP installment. So as per my understanding if even you start a SIP for 5 years and redeem after one year of your start date, then you have to pay tax and as well as exit load charge. So a five-year SIP, actually you have wait 1 more year to escape tax & exit load. In case of lumpsum then calculation is straight forward. Please let me know if I am correct or not.
- Raju Thomas

Mutual fund schemes mostly charge exit load if investor redeems or switches from a scheme before completion of one year from the date of allotment. In case of SIP, the same rule applies. Each installment has to complete 12 month to escape exit load. So, if you have done a 5-year SIP, you will have to wait for 6 years if you wish to redeem complete sum at once without paying any exit load. Or, you may redeem first 4 years units and wait for the fifth year's installment to complete 12 months.

Similarly rules applies for long-term capital gains tax. Each and every SIP installment should complete 12 months to qualify for the long-term capital gains tax. If you redeem your SIP instalments before the completion of 12 months, you will have to pay short term capital gain tax on them.

This article was originally published on January 08, 2016.