SIF Tax on Redemption: The Complete Mechanics

The clock starts at allotment

For tax purposes, the holding-period clock begins on the date your SIF units are allotted to your folio. This is typically T+1 or T+2 from your subscription, depending on the AMC. For NFO subscriptions, allotment happens on the scheme's re-opening date (5 business days after NFO close) — so even if you subscribed on day 1 of the NFO, your clock starts at re-open.

For SIPs, each installment carries its own clock. Redeem at month 18 of an 18-month SIP and the first 6 installments qualify as long-term while the remaining 12 are short-term. FIFO matches the oldest installments to the redemption first, maximising the LTCG portion.

FIFO — and why you can't override it

FIFO (First-In-First-Out) is mandated by SEBI and the AMC; you cannot instruct the AMC to redeem newer units first to preserve older long-term units. This is mostly fine — FIFO is generally tax-favourable because older units are likeliest to be long-term. The exception is when older units are at a loss and newer units are at a gain. In that case, FIFO forces you to realise the loss first, which may not always be what you want.

Interval vs daily redemption — same tax, different timing

Several Hybrid Long-Short SIFs (Altiva, Magnum) operate on interval-redemption windows — typically Mondays and Wednesdays. An interval-fund SIF is taxed exactly like a daily-redemption SIF: 12-month threshold, 12.5%/20% rates for equity-oriented, slab rates for non-equity. The difference is purely liquidity.

This matters for end-of-year tax planning. If your interval SIF only redeems on Mondays/Wednesdays and March 31 is a Sunday, your last redemption opportunity for FY 2025-26 is the prior Wednesday (March 27). Plan accordingly.

Settlement vs redemption — date that matters

The taxable date is the redemption-request date, not the cash-credit date. Submit a redemption request on March 30 with the cash hitting your bank April 2, and the gain is taxed in FY ending March 31 — not the new financial year. This matters for two scenarios: (1) staying within the ₹1.25 lakh equity LTCG exemption per FY, and (2) absorbing carry-forward losses that are about to expire.

Frequently asked questions

When does the holding-period clock start for SIF tax?

The clock starts on the date of unit allotment, not the date of NFO subscription or fund inception. For new investors subscribing during an open window, allotment typically happens on T+1 or T+2 from your subscription. For SIPs, each installment has its own clock starting from that installment's allotment date.

How does FIFO work on SIF redemption?

First-In-First-Out: when you redeem partial units, the AMC assumes you're redeeming the oldest-acquired units first. This is favourable for tax — your oldest units are most likely to qualify as long-term, so partial redemption gets LTCG treatment first. You cannot specify which units to redeem; FIFO is automatic.

Is interval-fund redemption taxed differently?

No — the tax treatment is identical to daily-redemption SIFs. The 12-month LTCG threshold applies the same way. The only difference is liquidity: interval funds restrict your redemption windows (typically twice a week or once a month), so you can't time exits as precisely. This affects strategy, not tax math.

What's the settlement-date treatment?

For SIF tax purposes, the redemption date for capital-gains calculation is the date you submit the redemption request (cut-off-time honoured), not the date the cash hits your bank. So if you redeem on March 30 with cash credited April 2, the gain is taxed in the FY ending March 31, not the next year. This matters for year-end tax planning.

How do I track holding period across multiple SIFs?

Use the AMC's CAS (Consolidated Account Statement) — emailed monthly to your registered address — which shows acquisition date for each unit lot. Online platforms like AMFI's CAMS or Karvy will also generate a unified capital-gains statement at FY-end with FIFO already applied. SIFPrime's portfolio tracker (in development) will surface real-time holding-period status across all your SIF holdings.