Need regular income: SWP or Dividend?

SWP or dividend

Changes in taxation on dividends:

MF category

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?

SWP Dividend parameter

Let us understand the difference with an illustration:

Summary is as follows:

data sheet 2

Key takeaways:

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.

(Information gathered and material used in this document is believed to be from reliable sources. We, however, does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments)

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