I had invested one lakh rupees in a liquid fund one year ago through SIP, now I want to withdraw 10k rupees from this. Do I have to pay capital gains tax on this since I am only withdrawing a portion of my investment and not the whole amount(including profits). If I have to pay capital gains tax, do I have to follow FIFO method to determine the tax applicable?
The tax treatment of Liquid Funds is same as Debt Funds:
If the liquid fund investment is held for more than three years, it is subject to long term capital gains which are taxable at 20% with indexation.
If the investment is held for three years or less than that, the capital gain is taxed at the slab rate applicable to the assessee.
FIFO method is commonly used for calculating the period of holding.