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RECOMMENDATION

How does SWP work?

Let say if you have a corpus of Rs 10 lakh invested in a mutual fund and wish to withdraw Rs 6,000 every month, here is how it works

Date Opening Balance (Units) NAV Total Amount Units Redeemed Closing Balance
01 Apr Rs. 10,00,00 100 Rs. 10,00,000.00 60.00 (6000/100) Rs. 9,940.00
01 May Rs. 9,940.00 105 Rs. 10,43,700.00 57.14 (6000/105) Rs. 9,882.86
01 June Rs. 9,882.86 103 Rs. 10,17,934.58 58.25 (6000/103) Rs. 9,824.61

The above data is for illustrations purpose only to explain the concept.

When the market rises, although you have withdrawn Rs 18,000 in 3 months, you still benefit on the balance part of your investment.

The icing on the cake is when the money is invested in an equity-oriented fund, it has the potential to beat inflation and create long-term wealth. Therefore, a SWP is more beneficial than just simply withdrawing money from savings corpus.

Benefits

* The above tax rates are to be grossed up.

** Security transaction tax (STT) at 0.001% will be deducted on equity oriented mutual fund

Please note load payable has not been considered. The above table is an illustration of various scenarios & do not indicate or promise that an investors objective will be achieved. Investors are advised to consult their tax consultants to know the consequences of tax, if any. Income Tax benefits to the mutual fund & to the unit-holder are in accordance with prevailing tax law. the investor shall be solely responsible for any action taken based on this document. The above rate is for resident individuals/HUF & exclusive of surcharge &cess.

Why SWP is good for you?