What Are STCG and LTCG in a Systematic Investment Plan in Jodhpur?
Many investors invest in mutual funds through a Systematic Investment Plan in Jodhpur. SIP helps you invest small amounts regularly and build wealth slowly. But along with returns, you must also understand how your SIP is taxed. When you redeem your mutual fund units and make a profit, that profit is called capital gain. This gain is taxed in two ways: ● Short-Term Capital Gain (STCG) ● Long-Term Capital Gain (LTCG) The type of tax you pay depends on how long you stayed invested.
What is Capital Gain in SIP? In SIP, you buy units every month. When you later sell those units at a higher price, the difference between the buying price and selling price is capital gain. ● If you sell early, it becomes STCG ● If you sell after a longer period, it becomes LTCG What is STCG in SIP? STCG (Short-Term Capital Gain) is the tax on profit earned when you sell your mutual fund units before completing the short-term holding period. For equity mutual funds: ● units sold before 12 months ● gain is treated as STCG Short-term tax is usually higher than long-term tax. This generally happens when investors: ● panic during market fall ● redeem for short-term needs ● do not plan investments What is LTCG in SIP? LTCG (Long-Term Capital Gain) is the tax on profit earned when you sell your units after the long-term holding period. For equity mutual funds: ● units held for 12 months or more
● gain is treated as LTCG Long-term tax is usually lower than STCG, encouraging long-term investing. This suits goals like: ● retirement ● children’s education ● wealth creation SIP Tax is Calculated Per Installment This is where most investors get confused. In the best SIP plan to invest in Jaipur: ● each SIP installment is considered a new investment ● each installment has its own holding period So taxation is not based on: ● SIP start date ● total years of investment It is based on how long each monthly installment stayed invested. Example: ● SIP starts in January ● you redeem in October ● units of January, February, etc., have not completed 12 months ● their gains become STCG If you wait beyond 12 months for each installment, gains on those units become LTCG.
Why Understanding STCG & LTCG Matters for Investors Knowing tax rules helps you: ● reduce tax burden ● plan redemptions properly ● avoid unnecessary selling ● hold investments longer when possible Sometimes simply waiting a few extra months can convert STCG into LTCG, saving tax. Conclusion SIP is a powerful way to create long-term wealth. But understanding STCG and LTCG taxation is equally important. Remember: STCG applies when you sell early, LTCG applies when you stay invested longer, each SIP installment has its own time period, and plan your redemption instead of reacting to the market. FAQs 1. What is the difference between STCG and LTCG in SIP? Answer: STCG (Short-Term Capital Gain) is the tax on profit when you sell mutual fund units before completing the short-term holding period. LTCG (Long-Term Capital Gain) is the tax on profit when you sell units after completing the longterm holding period. 2. How is STCG and LTCG calculated in SIP? Answer: In SIP, each monthly installment is treated as a separate investment. So tax is calculated installment-wise. If any installment is sold before completing the required period, its gain becomes STCG. If it completes the long-term period, its gain becomes LTCG.
3. Does SIP start date decide STCG or LTCG? Answer: No. The SIP start date does not decide tax type. What matters is how long each installment stayed invested. Every SIP installment has its own holding period, and STCG or LTCG is calculated based on that. 4. How can investors reduce tax on SIP returns? Answer: You can reduce tax by: ● holding equity SIP units for more than 12 months ● avoiding frequent buying and selling ● planning redemption according to goals ● waiting a little longer so STCG becomes LTCG Proper planning often helps lower tax legally.
Address: S. No. 15,1st floor, Shanti Tower, chang gate, Beawar, Rajasthan 305901 Contact Us: 8905987729/8905987728
