Guide
Tax is the part of SIP returns that most calculators quietly ignore — and it can change your real outcome by lakhs.
For equity mutual funds, gains on units held longer than 12 months are long-term capital gains. Under the 2024-25 regime, LTCG is taxed at 12.5%, with the first ₹1.25 lakh of such gains in a financial year exempt.
Gains on units held for 12 months or less are short-term capital gains, taxed at a higher rate. This is why holding period matters so much.
Here's the subtlety unique to SIPs: every monthly instalment buys units on a different date, so each instalment has its own holding-period clock. When you redeem, the units bought more than a year ago are long-term; the recent ones may still be short-term.
This means a SIP redemption is rarely all-LTCG or all-STCG — it's a blend, and a proper calculation handles each tranche separately. Most online calculators don't; ours is built to.
The ₹1.25 lakh annual LTCG exemption resets each financial year. Some investors deliberately harvest gains up to the exemption limit each year to reset their cost basis tax-free — a technique worth discussing with a tax adviser.
The key takeaway: always look at your post-tax corpus, not the headline number. The gap is real money.
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