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How are equity international mutual funds redemptions counted for tax purposes?

For mutual funds, redemption is always as per first in first out (FIFO) method wherein units first bought are redeemed first

I had SIP investment of ₹1000 in Franklin Asian Equity fund from Jan 2010 till Jun 2014. From September 2014 onwards I started an SWP of ₹4500 per month which is still continuing. To calculate capital gains should I consider 1. First-in-first-out or 2 Last-in-first-out. If I go with FIFO then I don't have to pay income tax at all as each SIP installment will exceed 12 months of holding, is it? However in LIFO, income tax on capital gains will be applicable for only those SIP with less than 12 months holding period. I do not see any mention which to go for in Income tax act.
- K C Shekhar

In your case all your redemption will qualify for taxation, however the initial few redemption would qualify for long term capital gain and rest would qualify for short term capital gain.

Franklin Asian Equity fund is an international fund and the taxation of this category is similar to that of debt funds. For mutual funds, redemption is always as per first in first out (FIFO) method wherein units first bought are redeemed first.

Your mutual fund redemption will qualify for long-term capital gains tax if your units are held for three years (36 months). The long-term capital gains tax will be 20 per cent with the inflation indexation benefit.

If your investments are redeemed before three years (36 months), the short-term gains will be taxed as per your applicable Income Tax slab.

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