Systematic Withdrawal Plan from equity MFs not recommended

I’ve been usually investing in numerous mutual funds schemes by way of SIPs for the final 10 years, and my present portfolio is round 50 lakh. Now I’m about to retire, and I may even get Rs30,000 as pension monthly. I need to begin a Systematic Withdrawal Plan (SWP) from my mutual fund investments. Are you able to inform when the best time to take action is? What elements ought to I take into accout?

Arjuna Reddy

Solutions by Sanjiv Bajaj, joint chairman and MD, Bajaj Capital:

It’s good that you simply took an funding resolution a number of years in the past to put money into mutual fund schemes by way of the Systematic Funding Plan (SIP) route. Since you’ve got collected a good quantity of Rs50 lakh, it may be certain that your retirement is comfy.

Nonetheless, please be aware that we don’t advocate SWP or Systematic Withdrawal Plan from fairness mutual fund schemes. We recommend you turn an quantity of Rs30 lakh out of your complete portfolio of Rs50 lakh to few money owed fund schemes like medium-term earnings plan, banking and PSU debt fund, or company bond funds after which begin an SWP from these debt fund schemes.

The remaining quantity of Rs20 lakhs in fairness mutual funds needs to be left there in order that it continues to develop, and you could once more swap this quantity to debt funds after few years, at any time when your debt fund portfolio is completed. Nonetheless, please be aware that whenever you swap from fairness mutual fund schemes to debt mutual fund schemes, you must handle your long-term capital acquire tax legal responsibility and be certain that you pay the tax, if due any.

I had bought a home two years in the past at a value of Rs85 lakh. However I don’t like the placement and infrastructure round it. Therefore, I’ve determined to promote it. As a result of depressed circumstances, I’m solely getting Rs75 lakh because the sale worth. Would you please let me know whether or not I will set off the lack of Rs10 lakh in opposition to my different enterprise earnings and save tax?


It’s essential to be aware that since you might be promoting the property in lower than three years after buying it, the loss being incurred by you shall be handled as a short-term capital loss. This short-term capital lack of round Rs10 lakhs can’t be set off in opposition to enterprise earnings or wage earnings and many others. It will probably solely be set off in opposition to any capital acquire earnings, whether or not short-term or long-term. You probably have quick time period or long-term capital acquire from promoting every other property or shares/mutual funds and many others., then you could be allowed to set off this loss in opposition to the features made by you.

Additionally, please be aware that short-term capital loss may be carried ahead for eight years, and also you might be able to set off the loss in opposition to the capital acquire earnings in any of the longer term years.

(Please ship queries and views at mintmoney@livemint.com)

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