VR Logo

Will STP from a debt fund attract short term capital gains tax?

An STP from a debt fund before the completion of three years will attract short term capital gains tax

My FD worth Rs 6 lakh will mature this month. How should I invest this in mutual funds for the next 6-7 years? Will STP from a debt fund attract short term capital gains tax?
-Sayish Kumar

For an investment horizon of around 7 years, you can consider investing in equity funds. If you are a first time investor, go for 2-3 good balanced funds. If you are a tax payer, you may opt for equity-linked savings schemes (ELSS) which offer tax benefits under Section 80C upto Rs 1.5 lakh. You can check the top rated funds here.

To answer your second question, funds transferred from one mutual fund to another through STPs are considered as redemptions from one fund and a fresh purchase in another, for taxation purposes. Therefore, if you do an STP from a debt fund before the completion of three years, it will attract short term capital gains tax. Your gains will be added to your income and taxed as per the slab system.

Post Your Query