Will I be taxed twice for protecting the money needed to reach my long-term goal?

Most of my money is in equities. Now, if three years before retirement, I move it to a debt fund, I believe I will have to pay capital gains tax as the gains are likely to be more than the basic exemption limit of Rs 1 lakh. But then later, will I be taxed again if I set up a Systematic Withdrawal Plan (SWP) from the liquid fund to my bank account? - Anonymous

Yes. The realised capital gains will be taxed in both instances.

However, paying capital gains tax in both instances does not mean paying twice the taxes. In fact, in each instance, only the gains for the relevant holding period are taxed.

In addition, it always makes sense to switch your money from equity to a fixed-income option two-three years before reaching your long-term goal. That's because equity is capable of throwing nasty surprises over shorter periods.

Therefore, as you come closer to the goal, it is important to move your money to a less volatile asset class (fixed-income) in a systematic manner.

This is where an SWP (systematic withdrawal plan) can be useful. Diverting your money from equity funds to a fixed-income fund through SWP reduces the risk of exiting at a market low.

Also watch: How to use SWP for pension?