SWP
Embedded Files
Systematic Withdrawal Plan (SWP) is a facility that allows investors to take a fixed amount out of an existing mutual fund at regular intervals.
You can gradually redeem your investment from a mutual fund scheme using a systematic withdrawal plan. SWP allows you to withdraw money in installments instead of to lump sum withdrawals. In contrast to a systematic investment plan (SIP), it is precisely opposite.
You transfer your bank money into your favorite mutual fund program through a SIP. Whereas an SWP allows you to transfer investments from a mutual fund plan to a savings account.
You can time your withdrawals based on your financial needs with the use of an SWP. You could choose an SWP if your goal needs to be deposited in stages. It will guarantee that the money is available when it is needed. By doing this, you can avoid having your goal's completion delayed by a cash shortage brought on by a negative market development.
Why Is the Systematic Withdrawal Plan a Good Investment Option?
This is a sensible financial move for two main reasons. First off, tax deductions at source (TDS) are not applied to these withdrawals—which are really redemptions—in any way. However, the withdrawn sum is subject to tax on the capital gains. You can also decide to set up your withdrawal so that you just take out the profits from your investment. This keeps your money invested while also allowing you to enjoy the rewards periodically.
Frequently Asked Questions (click here)
Frequently Asked Questions (click here)
Advantages of Systematic Withdrawal Plan?
Advantages of Systematic Withdrawal Plan?
Investment discipline
Regardless of market conditions, an investor can use SWP to automatically redeem some mutual fund units each month to cover monthly costs. As a result, it safeguards against making substantial withdrawals out of fear or panic amid volatile market conditions. It permits withdrawals even as markets reach new highs, protecting investors from irrational investment decisions during boom times.
A steady source of Income
By guaranteeing a consistent and regular flow of revenue during the selected time, SWPs can aid your finances. It can be very helpful, particularly if you have reached retirement age or when you require additional cash flow to cover costs like your child's college tuition.
Meeting financial goals
If properly planned, SWPs can be a fantastic asset for you and make reaching your financial objectives simple. A second source of income in addition to the pay is always advantageous. It can prevent the achievement of your goals from being put off because of a monetary shortage or lack of funds. SWP is a terrific value addition if it is scheduled for redemption at a time when you will need it the most.
Tax Benefit
Since tax is usually payable only on the income component and not the capital component, SWP can be a great way to benefit from tax efficiency. Withdrawals on the SWP are treated as a combination of Capital and Income.SWPs also enjoy tax exemption for up to Rs. 1 lakh on long-term capital gains. The investor needs to pay tax only on earnings in excess of Rs. 1 lakh. In the case of equity funds, tax is to be paid on the gains from equity at 15% on the withdrawn sum if the holding period is less than a year.In the case of debt funds, if it is withdrawn within 3 years, the returns are treated as a part of income and taxed on the basis of the relevant slab rates. On the other hand, if it is withdrawn after 3 years of investment, then the gains from equity mutual funds are taxable at a rate of 20% after indexation, which is, of course, more profitable.
Who can choose to invest in a Systematic Withdrawal Plan?
Who can choose to invest in a Systematic Withdrawal Plan?
SWP helps investors to create a regular flow of income from their investments. Existing investors looking for income at periodical intervals usually use SWP to fund expenses during retirement.
How does a Systematic Withdrawal Plan work?
How does a Systematic Withdrawal Plan work?
A Systematic Withdrawal Plan (SWP) works in an opposite way to Systematic Investment Plan (SIP). An investor may INVEST a fixed amount in a systemic investment plan (SIP) at predetermined intervals but in case of systematic withdrawal plan (SWP) an investor may WITHDRAW a defined amount at predetermined intervals. Depending on his requirements, the investor can pick the SWP's amount, frequency, and length.
When to use a Systematic Withdrawal Plan?
When to use a Systematic Withdrawal Plan?
When an investor wishes to receive regular cash flow from his investments, he might adopt a systematic withdrawal plan. Everybody has a different need for a Systematic Withdrawal Plan. SWP can be helpful for retirement, paying EMIs, and many other things.
Page updated
Google Sites
Report abuse