Systematic withdrawal plan for equity mutual funds not recommended
I have regularly invested in various mutual funds through SIPs over the past 10 years, and my current portfolio is around ??50 lakh. Now I am about to retire and I will also receive Rs 30,000 per month as a pension. I want to start a Systematic Withdrawal Plan (SWP) of my mutual fund investments. Can you tell when is the right time to do it? What factors should I keep in mind?
Answers from Sanjiv Bajaj, Co-Chairman and Managing Director of Bajaj Capital:
It is good that you made the decision to invest several years ago to invest in mutual funds through the systematic investment plan (SIP). Since you have accumulated a decent amount of Rs50 lakh, this can ensure that your retirement is comfortable.
However, please note that we do not recommend the SWP or the systematic withdrawal plan for equity mutual funds. We suggest you transfer an amount of Rs30 lakh from your total portfolio of Rs50 lakh to a few debt fund programs like medium term income plan, bank debt fund and PSU, or corporate bond fund , then start a SWP from those debt fund programs.
The remaining amount of Rs20 lakhs in equity mutual funds should be left there for it to continue to grow, and you can convert this amount back to debt funds after a few years, whenever your fund portfolio is debt is over. However, please note that when you switch from an equity mutual fund to a debt mutual fund, you need to take care of your long-term capital gains tax and make sure you pay the tax. tax, if applicable.
I had bought a house two years ago at a cost of Rs85 lakh. But I don’t like the location and the infrastructure around it. So I decided to sell it. Due to depressed conditions I only get Rs75 lakh as sell value. Could you please let me know if I will be able to offset the loss of Rs10 lakh with my other business income and save tax?
You should note that since you are selling the property within three years of acquiring it, the loss you incur will be treated as a short-term capital loss. This short term capital loss of around Rs10 lakh cannot be deducted from business income or salary income etc. It can only be deducted from capital gains income, whether short term or long term. If you have a short or long term capital gain resulting from the sale of other property or stocks / mutual funds etc., you may be allowed to offset this loss against the gains you have made.
In addition, please note that the short-term capital loss can be carried forward eight years and you may be able to offset the loss with the capital gains income in one of the future years.
(Please send your questions and opinions to [email protected])
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