How does the taxation on redemption of SIPs work?

Taxation on SIP is done on a pro-rata basis. Every SIP is treated as a fresh investment, and capital gains are taxed accordingly. 

For example, today, you start a SIP of ₹10,000 in an equity fund. After 12 months, if you decide to redeem your whole corpus, all your gains will come under short-term capital gain taxation except your first SIP, the only investment that has completed one year.

Any gains of up to Rs. 1 lakh over the long haul won't be taxed. But if you redeem your units before holding them for a year, the gains from SIPs will be considered short-term and taxed at a flat rate of 15%, along with extra charges.

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