Partial Redemption on WebNotes

How to place a mutual fund redemption (partial or full)

Tue, 19 May 2026 00:00:00 +0000

Placing a mutual fund redemption is operationally simple but the tax and timing consequences require attention. The settlement timeline depends on scheme type (T+0 for liquid, T+1 for equity, T+2 for debt typically), and the NAV applied depends on the cut-off rule.

Conflict-of-interest disclosure. This guide is published by WebNotes Editorial Team for informational purposes. WebNotes has no commercial relationship with any AMC or platform. No affiliate commission is earned. For substantial redemptions, consult a CA for tax optimisation.

Taxation of STP transactions in mutual funds

Tue, 12 May 2026 00:00:00 +0000

Taxation of Systematic Transfer Plan (STP) transactions in mutual funds follows the same capital gains framework as any partial redemption. An STP is a facility that automatically transfers a fixed amount (or fixed units) from one mutual fund scheme (the “source” fund) to another scheme (the “target” fund) of the same AMC at regular intervals. Each STP transfer is treated as a partial redemption from the source fund and a simultaneous fresh purchase in the target fund. Capital gains crystallise on the source-fund units redeemed at the STP transfer date, and the target-fund units acquire a new holding period starting from the transfer date. There is no provision for deferred taxation or rollover relief for STP transactions under the Income Tax Act 1961.

Taxation of SWP withdrawals from mutual funds

Tue, 12 May 2026 00:00:00 +0000

Taxation of Systematic Withdrawal Plan (SWP) withdrawals from mutual funds follows the standard capital gains framework applied to partial redemptions. A SWP is a facility offered by mutual fund houses that allows investors to redeem a fixed amount (or fixed number of units) at regular intervals – typically monthly, quarterly, or annually. Each SWP instalment is treated as a partial redemption of units, and capital gains (or losses) crystallise on the redeemed units at the time of each withdrawal. The FIFO method is applied to identify which lot of units is being redeemed in each instalment, and the holding period of the identified lot determines whether the gain is short-term or long-term. SWP withdrawals are fundamentally different from IDCW (dividend) distributions in their tax treatment: unlike IDCW, which is taxed at slab rates as income from the fund, SWP withdrawals return a mix of capital (original investment) and capital gains, of which only the gains element is taxable.