As an investor, we are sure you have heard about an SIP or systematic investment plan, where you fix an amount to be deducted from your bank account on a pre-decided date every month, to be invested in a fund of your choice.
But have you heard about a Systematic Withdrawal Plan?
If not, then in this article we are going to tell you more about systematic withdrawal plans.
A Systematic Withdrawal Plan or SWP as it is commonly called, gives the freedom to an investor to withdraw an amount every month/week/quarter/year from his/her mutual fund scheme. The date for this withdrawal is pre-defined.
The best part is that this amount that is withdrawn could be withdrawn on an annual, semi-annual, quarterly, or monthly basis.
In simpler words, a systematic withdrawal plan gives you an option to redeem your investment in a phased way.
But mind you, it is different from lump sum withdrawals. Systematic Withdrawal Plans helps an investor withdraw money in pre-determined instalments.
Which makes it a stark opposite of a systematic investment plan (SIP).
Because as you know, in an SIP, you invest from your bank account into the fund of your choice. Whereas in a Systematic Withdrawal Plan, you move your investments from your mutual fund to your bank account.
Systematic withdrawal plan lets you choose to withdraw a fixed amount at a pre-determined frequency from the invested corpus. After withdrawal, the amount will be deducted from the investment while it continue to accumulate interest.
You can use this as you want – reinvest in some other fund or use it for achieving your goals.
So, who are the investors for whom a systematic withdrawal plan is ideal for?
So, in short, a systematic withdrawal plan is ideal for investors who want to redeem their units regularly and get the monies in their account at pre-determined intervals.
So, do you think a systematic withdrawal plan is ideal for you?
Well, before you jump on the wagon, we want you to know about something else, which is very important.
Systematic Withdrawal Plan Calculator:
A systematic withdrawal plan calculator is, in simple words, just a simulation that gives you a fair idea of the monthly withdrawals from your mutual fund investments.
A systematic withdrawal plan calculator needs you to enter the total investment amount, the withdrawal you plan to make per month, your expected rate of return, and the period/tenure of the investment.
The systematic withdrawal plan calculator to be used to know how much an investor can withdraw from his or her lumpsum investments.
Before you start investing and withdrawing with a Systematic Withdrawal Plan, it is very much recommended that you have access to and know how to use a systematic withdrawal plan calculator.
All systematic withdrawal plan returns you get from redemption via an SWP is subject to taxation.
For debt funds, where the holding period is lower than 36 months, the capital gains are added to your overall income and the applicable income tax slab rate is then applied to them.
However, if the hold period is more than 36 months, then the capital gains are taken as long-term and taxed at 20% post indexation.
As for equity funds, if the holding period is less than 12 months, the capital gains realised are taxed at the rate of 15%.
And for holding period more than a year for an amount exceeding Rs.1,00,000, it is considered long-term capital gain and is taxable at 10% without indexation.
We think you now are well versed with Systematic Withdrawal Plan in Mutual fund.
So, if you want to start with a systematic withdrawal plan in mutual funds, you can start with it right here with Quantum Mutual Funds.
You can start a systematic investment plan in mutual funds with Quantum Mutual funds, for the following schemes:
• Quantum Long Term Equity Value Fund
• Quantum Liquid Fund
• Quantum Tax Saving Fund
• Quantum Equity Fund of Funds
• Quantum Gold Savings Fund
• Quantum Multi Asset Fund of Funds
• Quantum Dynamic Bond Fund
• Quantum India ESG Equity Fund
If you choose to invest through a systematic withdrawal plan in mutual funds with Quantum, you can invest lump sum and get a fixed pay-out at fixed intervals i.e. it allows the account holders to access their money at regular intervals.