I am planning to start a SIP in a monthly income plan and subsequently, a STP in equity fund. Do I have to pay any tax in this transaction?.
-Abhijit Kale
A monthly income plan (MIP) is a debt-oriented mutual fund. The current tax laws say that capital gains from a debt oriented fund are clubbed with an individual's other incomes and taxed as per the slab system if the holding period is less than one year (called short-term capital gains tax). If the holding period is greater than one year, then the tax is lower of 10 per cent of the capital gains without indexation or 20 per cent of the capital gains with indexation (called long-term capital gains tax). Indexation is the process of adjusting the purchase price of units for inflation.
Assuming that your holding period for the units of an MIP will be less than one year, your transaction will be subject to tax as per the slab system if there are any capital gains. Another cost will be that of loads. Most of the MIPs charge an exit load of anywhere between 0.5 to 1 per cent upon redemption within 6 months from the date of allotment.
This article was originally published on March 14, 2006.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
