Systematic Withdrawal Plan: All the Details
By SiliconIndia
Regularity Of SWP:
With SWP, you are assured of getting a fixed amount at your pre-determined frequency. The problem with other options like a monthly income plans, like pay dividends is that the amount and the frequency of the payouts is not fixed. Sometimes, if there is no appreciation which can be distributed, you might have no dividends to be paid. Hence, every month you will have different amounts …… coming in and in some month there might be no money received.
Taxation:
SWP is better from the taxation point of view too. In debt funds, dividends are paid after deduction of dividend distribution tax (DDT) of 13.5 percent. So that will be your tax in case you depend on dividend income from your debt mutual funds. In case of SWP, you will pay a short term capital gain (STCG) or a long term capital gains tax (LTCG).
Though STCG may be more expensive as it is on the income slab of the investor, whereas LTCG will be beneficial with its fixed rate of 10 percent or 20 percent with indexation.
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