Is SIP tax free?

Asked by: Gabriella Fahey  |  Last update: February 9, 2022
Score: 4.2/5 (45 votes)

If an investor is investing through SIPs in equity funds or balanced mutual fund schemes, then all the gains made after one year will be considered as long-term capital gains that will be completely tax-free. ... So, yes, SIP investments are tax-free, but there are certain limitations to it.

Is SIP income tax free?

If a SIP of an equity fund is held for less than 12 months, there will be short-term capital gain taxable at 15%. ... But if a SIP of a debt fund is held for 36 or more months, then there will be long-term capital gain taxable at 20% after indexation of cost.

Is SIP eligible for tax deduction?

SIPs can be one of the best tax-saving instruments with high returns on your investments. You can claim a deduction of up to Rs. 1.5 lakh from your taxable income for investing in ELSS through SIPs under Section 80(C) of The Income Tax Act, 1961. With the highest tax slab of 30%, you can save up to Rs.

How much tax do I pay on SIP returns?

If the long-term capital gains are less than Rs 1 lakh, then you don't have to pay any tax. However, you make short-term capital gains on the units purchased through the SIPs from the second month onwards. These gains are taxed at a flat rate of 15% irrespective of your income tax slab.

Which SIP is tax free under 80C?

Which SIP is tax free under section 80c? 80C allows deduction upto Rs 1.5 lakh for investment made in ELSS (equity linked savings scheme). You can also start SIP for ELSS mutual funds for which deduction upto Rs 1.5 lakh will be available u/s 80C.

Tax Benefits through SIP under Sec 80c

22 related questions found

Is SBI SIP tax free?

SIP is a "Systematic Investment Plan" where an investor invests a particular amount at a regular interval such as quarterly, monthly or weekly. The Systematic Investment Plans can be started from as low as Rs 500. However, the investors with tax-saving in mind should note that all SIPs are not tax-free.

Can I withdraw SIP anytime?

- You do not need to sell all your top SIP units. - If you have purchased close-ended schemes or open-ended schemes, you can redeem them anytime. - If you have invested in ELSS, you cannot redeem your units before 3 years. - You can redeem your SIP investment only on a business day.

Which mutual fund is tax free?

Long term capital gains upto Rs 1 Lakh is totally tax free. Dividends paid by equity mutual funds are tax free in the hands of the investor but the AMC pays dividend distribution tax (DDT) at the rate of 11.648%.

How do mutual funds avoid taxes?

How to manage LTCG tax on Equity Funds
  1. Ensure a complete understanding of the equity fund scheme before making an investment decision. ...
  2. Avoid frequent buying and selling of units of the equity fund. ...
  3. Select only those equity funds that have a track record of performance for an extended period (at least five years).

Can I invest 1000 in mutual funds?

Mutual funds primarily offer investment through SIP option, lump sum option or both. This is in no way a recommendation that historical returns or a minimum investment amount of Rs 1000 should be considered foremost before making any investment. ...

What is Section 80CCD?

What is section 80CCD(1B)? Section 80CCD(1B) specifically deals with contributions made by an individual (employee or self employed) to pension schemes as notified by the central government. This section provides additional deduction of Rs 50,000 over and above 80C limit of Rs 1.5 lakh.

How much tax do you pay on mutual fund withdrawals?

If you withdraw from your equity mutual fund units after 12 months of holding, then a long term capital gain will arise. The long term capital gain will be taxed at 10% without the benefit of indexation. Moreover, a long term capital gain on equity mutual funds up to Rs 1 lakh is exempt from tax.

Is mutual fund return taxable?

Any returns that are gained from mutual fund investments are also liable for taxation. In fact, the returns are taxed under the 'Income from Capital Gains' header. ... Thus, it can be short-term or long-term based on the holding period of the investment.

Do you pay taxes on mutual funds?

Generally, yes, taxes must be paid on mutual fund earnings, also referred to as gains. Whenever you profit from the sale or exchange of mutual fund shares in a taxable investment account, you may be subject to capital gains tax on the transaction. You also may owe taxes if your mutual fund pays dividends.

Are mutual funds safe?

Are mutual funds safe? All investments carry some risk, but mutual funds are typically considered a safer investment than purchasing individual stocks. Since they hold many company stocks within one investment, they offer more diversification than owning one or two individual stocks.

How can I avoid tax on mutual funds in India?

2. Is there a Way to Reduce Capital Gains Tax on Short Term Gains? In the case of both Equity and Debt Mutual Funds, there is currently no way to reduce the Capital Gains Tax applies to your short-term returns. So you have to pay Capital Gains Tax as per your slab rate in case you book short-term gains from Debt Funds.

What is the tax rate on a mutual fund?

Stock Funds

For capital gains, there are two rates: short-term (less than one year) and long-term (for assets held longer than one year). Long-term capital gains are smaller with a maximum of 20%. Most people pay the 15% rate or 0%. Short-term gains are taxed as ordinary income.

Does all SIP comes under 80C?

Every SIP instalment into an SIP counts towards tax deductions under Section 80C. You can claim a tax rebate of up to Rs 1,50,000 and save up to Rs 46,800 a year in taxes.

Does all mutual funds are tax free?

No, all mutual funds do not qualify for tax deductions under Section 80C of the income tax Act, Only investments in equity-linked saving schemes or ELSSs qualify for tax deduction under section 80C. Investors can invest in ELSSs and claim tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.

Is index fund tax free?

Taxation of Index Funds

As index funds are a class of equity funds, they are essentially taxed like any other equity fund plan. The dividends offered by an index fund is added to your overall income and taxed at your income tax slab rate.

How do I sell my SIP?

4 steps to selling a mutual fund
  1. Contact your financial advisor or mutual fund company. Get in touch with the advisor who sold you the fund, or someone in their company. ...
  2. Ask about any fees or charges. ...
  3. Decide how many units or shares you want to sell. ...
  4. Give instructions on what to do with the money.