Income tax returns (ITR) filing: Mutual fund STP, SWP offer big benefits to investors
When you sweep funds out of an equity or debt fund it will be treated as a sale and taxed accordingly. If you are sweeping money out of debt/liquid funds into equity then any sale before three years will be short-term capital gains (STCG) and will be taxed as per your slab rate. Alternatively, any sale after three years will be LTCG and will attract tax at 20% after indexation.
SWPs are normally done on debt funds or liquid funds as they are more predictable compared to equity funds. In case of debt funds, it is LTCG only if held for more than three years. Image source: