Equity MFs are meant for long term investing, implying you are not likely to require that money for the next 5-7 years at least.
Tax Can Be Deducted
On withdrawal, you can be taxed, depending on how long you stayed invested and whether you invested in equity or debt.
Short Term Capital Gains Tax
If you decide to withdraw money sooner, specifically within 1 year of making an equity investment, then your gain will be taxed at flat 15%.
This rate does not depend on your income slab.
This is called short-term capital gains tax
If you withdraw from debt funds before 3 years, the profit on the withdrawn units will be taxed at your income slab rate.
If it’s after 3 years, then you pay tax at the rate of 20% after indexation.
Debt MFs cater to short term money needs, 1-5 years.
With Systematic Investment Plans, the period of holding is calculated separately for each month’s investment and not from start or end date.
Capital gains tax can have a significant impact if you redeem investments without considering the time frame.
If you invest in equity, hold for at least a year. In the case of debt, 3 years is ideal to minimise the tax hit
-but you can’t avoid it.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.