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Is monthly income from systematic withdrawal plan taxable?


I am a 63-years-old lady doctor. For my retirement and because of covid I have sold one of my clinics. I have invested that amount in a monthly systemic withdrawal plan. My clinical practice is one-fourth of what it was before covid. Is the monthly amount I get from SWP taxable income?

Dr Vipin Sehgal

The redemption via a Systematic Withdrawal Plan is subject to taxation. In the case of debt funds, if your holding period is less than 36 months, then the amount that you withdraw will form a part of your income and will be taxed according to your income slab. On the other hand, if the holding period is more than 36 months, then the long-term capital gains will be taxed at 20% with indexation.

In the case of equity funds, if your holding period is less than one year, then the withdrawn amount will be taxed at the rate of 15% whereas if the holding period is more than one year, then the long-term capital gains will be taxed at 10% without indexation.

My age is 28 years, and I am a government servant, currently, my salary is 40,000, I have 5 lakh in my savings. I want to increase my money by investing in low-risk areas, please suggest.

Vinit Dubey

It is always advisable to keep at least 10% as an emergency fund aside, which can be invested in Arbitrage fund while remaining savings can be utilized in creating a Mutual Fund portfolio consisting of Debt, Equity & Hybrid Funds.

10% of the savings can be invested equally in Edelweiss Arbitrage Fund & Kotak Equity Arbitrage Fund and 40,000 each via 10 months STP route in Canara Robeco Flexi Cap Fund, UTI Flexi Cap Fund & Mirae Asset Mid Cap Fund in Equity category. Lumpsum 90,000 each in Aditya Birla Sun Life Balanced Advantage Fund & ICICI Prudential Balanced in Hybrid category while 50,000 each in HDFC Corporate Bond Fund & IDFC Bond Fund Short Term Fund in Debt category while remaining Rs.

50,000 can be invested in good quality corporate FDs like Bajaj Finance or HDFC. This way your portfolio will be diversified across Asset Class, Category, Scheme & AMC. It is also advisable to keep reviewing your portfolio at least once a year.

Answered by Sanjiv Bajaj, joint chairman and MD, Bajaj Capital. Queries and views at [email protected]

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