Need Help in STGC on STP

Taxation
1

Need help regarding STGC tax on STP of mutual funds.

Right now, I have 10 mutual funds - all started in last 3-10 months. I want to start STP from 4 funds to rest of 6 funds because — a. I want to reduce overall funds b. Those 4 funds are not giving much return and most probably won’t give much return even after 1 or 2 years.

Now, I have read that when we do STP, then the amount transferred is considered as redeemed and tax is applied. But how the profit is calculated.

1. For example, the liquid fund has 50k and has only Rs 600 as profit. So if I transfer 2k each month, how the stgc will be calculated?

2. Is it better to do SWP or full redeem and then invest in another mutual fund through bank account?

2

STCG will be calculated on profit every time you STP or redeem . e.g if you STP/redeem 2K with 600 Rs Profit, stcg on 600 then again 2k redeem with 500 Rs profit. stcg on 500 Rs and so on

You can either STP or redeem, both are same for taxation. If you redeem, money will be in your bank after 2-3 days so STP can be a better option for you as you don’t need to wait for the money then reinvest. Redeem and reinvest may take 2-3 days while STP will be immediate investment

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3

thanks!

4

The correct way is the First in first out method.

If you have the following in chronological order

T1: Fund1 - Buy 100 @ 100
T2: Fund1 - Buy 100 @ 200
T3: Fund1 - Sell 50@200
T4: Fund1 - Sell 100@300

THEN,

Batch1: Qty 50(Sell 50@200)

Purchase price : 50@100(T1)
Sell price: 50@200
Profit: (200-100)x50=5000

Batch2: Qty 100(Sell 100@300)

Purchase price : 50@100(T1 remaining)
Purchase price : 50@200(T2)
Sell price: 100@300
Profit: 100x300-(100x50+200x50)= 15000

Remaining Batch(Carried forward):
T2: Fund1 - Buy 50 @ 200

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