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Ch.9 · Systematic Transactions — SIP, SWP, STP · medium

In an SWP, each withdrawal from an equity fund held for more than 12 months is treated as:

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EXPLANATION

Each SWP installment is a partial redemption. If units being redeemed have been held for more than 12 months, LTCG at 12.5% applies on gains exceeding the ₹1.25 lakh annual exemption under Section 112A.

A.Ordinary income taxable at slab rate

B.Short-term capital gain taxable at 20% flat

C.Tax-free as the fund has been held for over 1 year

D.Long-term capital gain taxable at 12.5% above ₹1.25 lakh annual exemption [✓ Correct]

EXPLANATION

Each SWP installment is a partial redemption. If units being redeemed have been held for more than 12 months, LTCG at 12.5% applies on gains exceeding the ₹1.25 lakh annual exemption under Section 112A.

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