Selling to switch is a taxable event. Staying put never was.
Redeem an 11.5 lakh pot inside a year and two bills come off on the way out. A slice of the gain to the tax code, and often a slice of the pot to the fund. Both settle before the new fund starts.
| The switch |
Rate |
Cost |
| Capital gains on the 1.5 lakh gain | 20 pct | 30000 |
| Exit load, inside a year | 1 pct | 11500 |
| Handed over just to move | 3.6 pct | 41500 |
Wait past twelve months instead and the rate drops to 12.5 pct, with the first 1.25 lakh of gains each year exempt, so the same gain costs about Rs 3125 and the load is gone. The tax code punishes the hop and pays for the hold.