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

Which of the following is TRUE regarding a switch-out transaction from an equity scheme?

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EXPLANATION

A switch is a redemption of one scheme and purchase of another. It is a taxable event — capital gains tax applies on the switch-out leg based on the applicable holding period.

A.It is treated as a redemption and capital gains tax applies [✓ Correct]

B.It is not subject to capital gains tax as it is an internal transfer

C.It is taxed only if the gain exceeds ₹5 lakh

D.Switch-outs are always exempt from exit load

EXPLANATION

A switch is a redemption of one scheme and purchase of another. It is a taxable event — capital gains tax applies on the switch-out leg based on the applicable holding period.

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