FAQs

Tax advantage In case of investments in equity mutual funds for a period of more than a year, the long term capital gain is exempted. Only short term capital gains are taxable at the rate of 15 percent (if the total income does not exceed Rs 1 Crore) on withdrawals from equity mutual funds investment within 1 year. Whereas in case of investments in debt schemes, the short term capital gain (an invested period is less than 3 years) is added to the investors income and taxed as per their tax slab. Long term capital gains in debt schemes are taxed at the rate of 20 percentage with indexation. In Systematic Withdrawal Plan (SWP), the tax is paid only on the gains made due to the NAV movement and not on the principal part in the withdrawals making the overall tax incidence lesser. Unlike SWP, in traditional investment options, the entire gain is taxed according to the investors tax bracket (the highest currently being 30 percent) considering if the investor falls under the highest tax bracket.? Regular supplemental income.  The option of SWP in a mutual fund can help you by providing a steady source of income from your investments. This is especially useful for those who need money when their cash flow comes to a halt like a retirement, or at a time when supplemental income becomes a necessity due to the altered circumstances in life. Meet financial goals If planned well ahead of time, SWPs can provide a steady flow of money when most needed. They can, therefore, be linked to long term financial goals, such as providing a steady income in ones retirement years or managing your childs educational expenses.