I have accumulated Rs 10 lakh through SIP. Should I go for a systematic withdrawal plan now and what will be the tax implication?
Ideally, withdrawals should be need-based-i.e. should be done to meet any planned / un-planned expenses. Any withdrawal would lower your portfolio value to the extent of the amount withdrawn, and you may also lose out on any subsequent gains on the withdrawn corpus that would have accrued till the end of your investment horizon.
Investors should stick to their long-term strategic asset-allocation which in turn depends on their risk appetite and not try and time the markets. You can consider re-balancing your asset-allocation back to your recommended long-term asset allocation in case of any significant drift due to the recent sharp uptick in equity markets.
Withdrawals via the systematic withdrawal plan (SWP) route are essentially treated as redemptions. The redeemed proceeds are subject to capital gains tax. For equity-oriented funds, capital gains in case of holding periods up to one year are termed as short-term gains and taxed at 15% excluding cess and surcharge. Capital gains in case of holding periods more than one year are termed as long-term gains and taxed at 10% on gains in excess of Rs 1 lakh per annum. For debt and foreign funds, capital gains in case of holding periods up to three years are termed as short-term gains and taxed at the marginal rate of income. Capital gains in case of holding periods more than three years are termed as long-term gains and taxed at 20% with indexation.
Is it mandatory to do a KYC again to open another SIP with a different mutual fund company?
No, a know your customer (KYC) compliant individual is not required to go through the KYC process again when starting SIP with different mutual fund houses. Once KYC is done through a Sebi registered intermediary, you need not undergo the same process again when you approach another intermediary. All mutual funds have facilitated a centralised platform through CVL, NDML, DotEx, CAMS & KARVY to carry out the KYC procedure on their behalf. Once registered with them, you can invest in any mutual fund.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to email@example.com