SWP: If you want to make a pension plan and for those who fall in higher tax bracket, this is a good option of mutual funds.
Many people opt for bank FDs or postal deposits to get regular income from their investments. Bank FDs and postal deposits have very low interest rates, so experts recommend staying away from such traditional options. Apart from these, another option is SWP from where you can earn extra return on your principal along with getting regular income. SWP means Systematic Withdrawal Plan . A good strategy can be made to get regular income through SWP .
What is Systematic Withdrawal Plan ( SWP)
SWP is also a mutual fund investment plan like SIP (Systematic Investment Plan), which gives an opportunity to the investor to choose the option of how much money to withdraw over a period of time. That is, you get a fixed amount back. You can withdraw the amount on daily , every week , monthly , quarterly , 6 months or yearly basis as per your requirement.
Certified financial planner says Amit Patel, ” there is also a mutual fund does not guarantee fixed returns but choosing the right scheme to earn higher returns than bank deposits as can. For SWP , you can choose any type of mutual fund scheme like equity, debt or hybrid. ”
Tax liability
You what type of funds from withdrawals have been like and how your fund period that according to SWP applies tax. Equity funds in case of , purchase of one year of safe to remove the short- term capital gains tax (STCG) of under 15% tax take. On exit after 1 year , from Rs 1 lakh More profits on long- term capital gains tax (LTCG) of under 10% tax take.
If you have invested money in debt funds , then after 3 years you will have to pay tax on withdrawal as per your tax slab and after 3 years after getting the benefit of indexation, 20 % tax will be applicable.
Who is SWP right for?
If you want to get secondary income, want to increase your principal, plan to make a pension plan and for those who fall in higher tax bracket, this is a good option. According to Patel, “ Through SWP , you can withdraw only the capital gain portion of the investment . Unlike other investments, the profit portion in this is not taxed, so this option is good from the tax point of view . Monthly option is more popular for earning income . “ SWP is better than dividend plans of mutual funds as 10 per cent TDS is deducted on the dividend and the dividend amount received by the investor is also considered taxable.
Exit load in SWP
If you withdraw money before the stipulated period, then exit load is levied. Examples of order , if you invest in the 6 th month of every month 10,000 rupees of SWP is , then every month SWP installment in the 1 per cent or 100 bucks harvested will.
