It depends on how long you stayed invested and whether you have invested in equity mutual funds (MFs) or debt MFs.
Let’s talk about Equity funds first
Equity is meant for long term investing, implying that you usually place that money in it, which you are not likely to require for the next 5-7 years at least.
However, if you decide to withdraw money sooner, specifically within 1 year of making an equity investment, then the money which was thus withdrawn (redeeming of MF units) will be taxed at flat 15% (this is called short-term capital gains tax). This rate does not depend on your income slab.
If you withdraw from your equity MF units after 12 months, you will not be taxed.
In case of debt funds
You typically invest in debt MFs for your short term needs or money which you would need in the next 1-5 years.
If you withdraw from your debt funds before 3 years, the profit on the withdrawn units will be taxed at the rate for your income slab.
Whereas, if you do so after 3 years, then you pay tax at the rate of 20% after indexation. In simple terms, Indexation ensures that you pay tax only on the profits that exceed the rate of inflation and therefore the actual tax you pay is very little. (more on indexation here).
Regular monthly (SIP) investors
The period of holding is calculated separately for each month’s investment and not from start or end date. So if you invest every month from January to December of 2017, in January of 2017, 1/12th of your investment will be 1 year old, another 1/12th will be 11 months old and so on, with the amount you invested in December 2016 is only 1 month old.
Capital gains tax can impact your gains significantly if you redeem your investment without keeping the time horizon in mind. If you invest in equity, hold for at least a year and in the case of debt, 3 years is ideal to minimize the tax hit (but there is no avoiding it).
Scripbox tracks the possible impact of capital gains and alerts you at the time of withdrawal, so you can make the best decision and avoid taxes.