SIPs are taxed in a FIFO (first in first out) fashion. This means that if you redeem part of your investment made through SIPs, the earliest SIPs are redeemed first and the later SIPs are redeemed later. For instance, if you made 12 monthly SIP instalments during a year and then you redeem part of your investment, your initial SIPs (first, second and so forth) are redeemed first.

This means that in order to qualify for long-term capital gains, each of your SIP in the invested corpus must complete at least one year. For equities, long-term gains (those made over one year) over Rs 1 lakh are taxed at 10 per cent and short-term gains are taxed at 15 per cent.