Can you explain STP taxation to me

To know more about STP, we suggest you to go through the following article -

https://www.advisorkhoj.com/iciciprumf...

Please note that when you are transferring from liquid fund to equity fund, each STP transfer from liquid fund may have some profit. This will be treated as short term capital gain and added to your income for that financial year in which the STP transfers took place. Since the gains will be added to your income, the tax will be payable according to the tax slab applicable to you for that financial year.

Now, let us come to the equity fund. Here, the equity fund is receiving the STP transfer each month from the liquid fund. Each transfer will be treated as a fresh investment and short term and long term capital gain tax will be decided on the basis of holding period of each transfer. For example - if the each transferred amount has not completed 12 months (From transfer date into the equity fund till redemption date), it will be treated as short term capital gains and taxed at 15% rate. If the transfer amounts have completed holding period of more than 12 months, then it will be treated as long term capital gains and no tax would be payable as long term capital gains in case of equity and balanced funds are tax free.

Please check the live example of a STP in our mutual fund research section https://www.advisorkhoj.com/mutual-funds...

Hope the above clears your doubt about STP taxation.