What is SWP and how it works: You will often hear experts saying that if long term financial planning is to be done, then mutual funds are a better option. Here, there is a higher return than safety and small savings scheme as compared to equity. Mutual funds only increase your wealth in the long term, but do you know that through this you can also arrange monthly and guaranteed income. Yes, you can also get regular income from your investment in mutual funds. For this, you have to choose the systemic withdrawal plan. Know what is SWP.
Means of regular income
Systematic withdrawal plans can become a source of regular income for you in mutual funds. This is a particularly good option for those who retire from jobs, or who need some extra income every month. In this, the investor himself chooses a fixed date according to his needs, on which day money comes into his account.
How does SWP work?
Through the Systematic Withdrawal Plan (SWP), investors get a fixed amount back from the mutual fund scheme. In how much time, how much money to withdraw, the choice is made by the investors themselves. This money can be withdrawn on a daily, weekly, monthly, quarterly, 6 months or yearly basis. By the way, the monthly option is more popular. If the investor wants to withdraw only a certain amount.
How to make tax efficient
Withdrawal from a mutual fund scheme is considered redemption and based on the scheme chosen, it is taxed according to the tax rates applicable to equity or debt. But if you plan properly, you can make your withdrawal tax efficient. Like debt funds, if you have started your SWP, the gain will be added to your income before the completion of 36 months and you will have to pay tax at the applicable tax rate. But if you plan early, and start withdrawing after 36 months, the profit from this will be considered as gains and after the induction there will be 20% tax. Therefore, planning early is beneficial in terms of tax.
What are ESG schemes; Why do mutual fund companies like this idea, know everything
SWP more reliable option
AK Nigam, director of BPN Fincap, says that SWP is a reliable option. Investor in it can control his investment on his own. SWP is a regular withdrawal through which the units are redeemed from the scheme. At the same time, if you have surplus money after the fixed time, then you get it. As far as tax is concerned, it will be taxed as it is in the case of equity and debt funds. Where the holding period is not more than 12 months, the investors will have to pay short-term capital gains tax. If you are investing in a scheme, then you can activate the SWP option in it.
This information is necessary for SWP
From which fund do you want to run SWP. Want SWP of Stretched amount. How long do you want to run SWP. It is necessary to specify the specified date of the month. These money are earned by selling units from your fund. If the funds run out, the SWP will be closed.
Difference between SWP and SIP
Every month fixed amount in SIP is deducted from your account. The amount deducted from the account goes to invest in mutual funds. The prescribed amount in SWP gets in your bank account. The SWP amount comes from the sale of mutual fund units.
#Mutual #Fund #Mutual #Fund #guaranteed #income #month #SWP #works