Need regular income: SWP or Dividend?
Changes in taxation on dividends:
Dividend is no longer a great option for investors. Systematic withdrawal plan is a better option for all investors since it is taxed at a much lower capital gains tax structure.
What is the alternate for investors seeking regular income?
Systematic withdrawal plan is a better option for all investors since it is taxed at a much lower capital gains tax structure.
What is Systematic Withdrawal Plan?
Systematic Withdrawal Plan allows an investor to withdraw a fixed or variable amount from his mutual fund scheme on a present date every month, quarterly, semi-annually or annually as per his needs.
How do you differentiate SWP option visa vis Dividend option?
Let us understand the difference with an illustration:
Summary is as follows:
1. Equity investors irrespective of its tax bracket should opt for systematic withdrawal plan (SWP) for regular income.
2. As far as debt-oriented funds which were subject to DDT at 25% (plus surcharge & cess) are concerned, investors falling in lower slab rates would gain by this announcement. Conservative investors especially those nearing retirement can opt for a growth option in debt funds and can consider SWP after 3 years making that option more tax efficient.
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