Do systematic transfer plans (STPs) attract capital gains tax?

Will I be liable to pay short-term capital gains tax if I setup a systematic transfer plan (STP) from a debt fund to an equity fund before 3 years from date of investment?
-Anupam Agrawal

Systematic Transfer Plan (STP) allows an investor to transfer a fixed amount regularly from one fund to another at a pre-defined frequency.
In your case, each STP installment from a debt fund, with a holding period of less than three years, will attract short-term capital gains tax. Therefore, the gains will be added to your total income and taxed at the marginal rate of tax (as per the slab system).

This article was originally published on September 06, 2016.