Originally posted by Monkey .....  All unit linked plans provide options for switching between 100% equity allocations to 100% allocations to liquid funds at anytime during duration of plan. Such features could be utilised to book equity profits and park the proceeds in liquid funds without attracting capital gains as you would not receive gains in your hands. The withdrawals then can be calibrated in line with tax bracket or it can be switched back to equity mode at appropriate time.....

Please make sure that the switch is not considered a redemption. If it is, then it is taxable, whether you get the cash in hand or not.

As things stand, if you switch your units from an equity mutual fund to a debt mutual fund run by the same fund house (within a year), you don't get the money in hand but the gains, if any, are taxable as STCG.

Originally posted by Hitesh Shah Originally posted by Monkey .....  All unit linked plans provide options for switching between 100% equity allocations to 100% allocations to liquid funds at anytime during duration of plan. Such features could be utilised to book equity profits and park the proceeds in liquid funds without attracting capital gains as you would not receive gains in your hands. The withdrawals then can be calibrated in line with tax bracket or it can be switched back to equity mode at appropriate time..... Please make sure that the switch is not considered a redemption. If it is, then it is taxable, whether you get the cash in hand or not. As things stand, if you switch your units from an equity mutual fund to a debt mutual fund run by the same fund house (within a year), you don't get the money in hand but the gains, if any, are taxable as STCG.

Another similar type of plan

Originally posted by Monkey .... I am talking about uinit linked plans offered by insurance companies where switching is allowed within internal options and, hence, not considered as redemption, as per my understanding.

Boss, the guys selling you the scheme want you to buy it (40% commission  on your first year's contribution?). So they will assuage all your doubts with fake assurances. I know you may not be finally going for this option, but it is better to get the advice of someone like Sandeep Shanbhag, whose columns I've been reading over the years. He's good and so is Tarun Ghai.

When I had looked at the tax-implications of switching between equity and debt, the MFs had a bald disclaimer that I should consult a tax expert as individual circumstances could vary.

Finally, somewhere I got the message that a switch is a transaction to sell one set of assets and buy another and is taxable.

The only "switches" which are not taxable are the changes involving dividend payout,  dividend-reinvest or growth options. Even the starting date of your investment will be unchanged in terms of date of acquisition.