Which are best SWP mutual fund for me

Good to hear that you are planning to allocate your retirement corpus well in advance. Here you go with our suggestions -

1. Nice to hear that you file income tax returns diligently.This is what our Government expects from a good citizen of this country.

2. SWP from mutual funds can or cannot be taxable, It depends upon two things - 1) The category of funds (equity or non-equity) that you have invested in and drawing your monthly SWP 2) When you are drawing the SWP. Let us understand this through an example -

Example 1 - Suppose you have invested in a Non Equity Fund (Debt Funds and Hybrid debt oriented funds, MIPs) - In these funds short term is defined as less than and upto 3 years, therefore, the profits made on all your SWP withdrawals within 3 years from the date of investment will be treated as short term capital gains and the gains will be taxed according to your tax slab.

What happens on the profits made on each SWP withdrawal after 3 years from the date of investment? These are treated as long term capital gain (as holding period is more than 3 years) and is taxed @20% after applying indexation benefit.

Example 2 - Suppose you have invested in Equity or Balanced Funds - In these funds short term is defined as less than and upto 1 year only, therefore, the profits made on all your SWP withdrawals 1 year from the date of investment is treated as short term capital gains and taxed @15%.

What happens on the profits made on each SWP withdrawal after 1 year from the date of investment? These are treated as long term capital gains (as holding period is more than 1 year) and it is completely tax free.

3. While filing ITR (Income Tax Return) you will notice the column capital gains. Here you need to define if your gains are short term and long term and from what category/ asset of investments. Once you input this the system automatically calculates the tax amount which is then added to your net tax payable for the FY.

4. Whether you should invest your total corpus in mutual funds or not is entirely your discretion and it should be based on your risk taking appetite. Though higher could be the return in case of equity and balanced funds, it will come with moderately high or high risk.

5. Ideally you should not draw (according to us) more than 8% annually as SWP during the initial years of your investments in hybrid debt, equity or balanced funds. Therefore to draw Rs 30,000 monthly you need to invest at least Rs 45 Lakhs in lump sum in funds suiting your risk profile.

Hope the above helps you. Thanks for writing to Advisorkhoj !