LTCG tax on SIP returns: how much of your gain you keep
A ₹10,000 SIP held 20 years gains about ₹76 lakh; LTCG takes around ₹9.7 lakh. See the tax at every horizon, how SIP units are taxed, and tax harvesting.
6 min read
SIP calculators usually show one big number at the end. But when you sell, the Income Tax Department takes a share of the gain. Since the July 2024 Budget, that share is bigger than it used to be.
Here's how much of your SIP gain you keep, worked out with the same tax logic as our SIP calculator.
How SIP gains are taxed in India
- Held a year or more (long-term): 12.5% on gains above ₹1.25 L in a financial year, plus 4% cess.
- Held under a year (short-term): 20% on the whole gain, plus 4% cess.[1]
The twist for SIPs: every instalment is its own purchase. Your March 2026 instalment turns long-term in March 2027, not when your first one did. When you sell, units go out first-in, first-out. So if you sell everything, the last 12 instalments are short-term and pay 20%.
What you keep at each horizon
Figure 1 from the SIP calculator
₹10,000 a month at 12%, all sold at once: paid in, gain kept and tax
- Paid in₹6 L
- Gain kept₹2.11 L
- LTCG tax₹13,515
- Paid in₹12 L
- Gain kept₹9.93 L
- LTCG tax₹1.3 L
- Paid in₹18 L
- Gain kept₹28.4 L
- LTCG tax₹4.06 L
- Paid in₹24 L
- Gain kept₹66.2 L
- LTCG tax₹9.71 L
- Paid in₹30 L
- Gain kept₹1.39 Cr
- LTCG tax₹20.61 L
How to read it
- 1After 5 years the tax is small, ₹13.5K, because most of the gain falls inside the ₹1.25 L exemption. The striped sliver at the end is the tax.
- 2After 20 years the tax is ₹9.71 L, about 12.8% of the gain. The exemption hardly matters once gains run into tens of lakhs.
| Held for | Paid in | Gain | Tax | Tax as % of gain |
|---|---|---|---|---|
| 5 years | ₹6 L | ₹2.25 L | ₹13.5K | 6% |
| 10 years | ₹12 L | ₹11.23 L | ₹1.3 L | 11.6% |
| 15 years | ₹18 L | ₹32.46 L | ₹4.06 L | 12.5% |
| 20 years | ₹24 L | ₹75.91 L | ₹9.71 L | 12.8% |
| 25 years | ₹30 L | ₹1.6 Cr | ₹20.61 L | 12.9% |
The tax share climbs from 6% to nearly 13%. It never quite reaches it, thanks to the exemption, but on a big corpus the exemption is a rounding error.
Try it with your numbersSIP CalculatorThe headline already shows what you'd keep after tax. Change the years to see the tax at any horizon.
Three ways to keep more of it (legally)
1. Don't sell it all in one year
The ₹1.25 L exemption is per financial year. Selling over several years, for example as monthly withdrawals in retirement, uses the exemption every year instead of once. The SWP calculator counts the tax on each year's withdrawals this way.
2. Harvest gains every year
If your fund has ₹1.25 L of long-term gain in a year, sell those units and buy back straight away. The gain is tax-free, and your purchase price resets higher. That can save up to ₹16,250 a year. Watch for exit loads, and remember the new units start a fresh one-year clock.
3. Don't sell in the first year
Short-term gains pay 20% instead of 12.5%. Plan big redemptions so the units you sell are over a year old.
What this doesn't mean
- Tax isn't a reason to skip equity. Even after tax, the 20-year SIP above turns ₹24 L into ₹90.2 L.
- Debt funds are different. Debt fund gains on units bought since April 2023 are taxed at your slab rate, whatever the holding period.
- Rules change with Budgets. These rates apply to equity fund units sold from 23 July 2024.[2]
Assumes a fixed 12% return, monthly instalments, and all units sold together at the end; 4% cess included. Equity-oriented funds only. For illustration only, not tax or investment advice.
Sources
- [1]Union Budget 2024-25: Budget speech (capital gains: 12.5% LTCG, ₹1.25 lakh exemption, 20% STCG) (opens in a new tab)Ministry of Finance, Government of India · 23 Jul 2024
- [2]Income Tax Department issues FAQs on the new capital gains regime (opens in a new tab)Business Today · 24 Jul 2024