Should I start drawing monthly SWP from my mutual fund investments

Even though you have invested in good funds, are you aware that investing in a mid and small cap fund (Franklin India Smaller Companies Fund) may be riskier for you as you are retired? As mid and small cap funds are riskier than other funds like balanced funds and hybrid funds, it may not be suitable for you.

However, if you are willing to take higher risk in anticipation of higher returns, you can continue with the same.

Our suggestion would be that you should start withdrawing the fixed amount (through SWP) from equity and balanced funds only after completion of 12 months from their respective investment dates as the gains made on each withdrawal then will be tax free in your hand. As your investments are nearing completion of 12 months, this should not be a problem for you.

However, this is not applicable in case of your investment in Aditya Birla Sun Life MIP Wealth 25 Fund as this is a hybrid debt fund (MIP) and the tax treatment is different. For MIPs, the long term capital gain (holding period more then 3 years) is taxed @20% after allowing indexation. As such you can start the SWP from this fund now. The gains made on all the withdrawals within 3 years will be treated as short term capital gains and taxed according to your tax slab. However, as your tax liability is minimum, this should not have much impact on your taxes.

The final suggestion would be that you should not draw more than 9-10% annual, say 0.75% per month from your funds during the initial few years. 12% (1% per month as mentioned by you) is bit high.

Hope you find our suggestion helpful. Thanks for writing to Advisorkhoj.