Withdrawals through SWP are more tax efficient as one pays only INR 1908 as tax on gains i.e. 0.35% on withdrawals of INR 5,40,000 as compared to INR 1,04,288 in case of traditional saving instrument

Source: Internal data compilation. Note: Past performance may or may not be sustained in future. The above examples including the taxation illustration for traditional investment are given for general information only. Load has not been taken into consideration. Units and numbers in the above calculations have been rounded off. Investments made in equity mutual fund schemes carry high risk and there is no assurance or guarantee that the objective of the schemes will be achieved. The above illustration should not be considered as any guarantee of returns to the investors who are opting for SWP. In view of the individual circumstances and risk profile, each investor is advised to consult their investment/tax advisor(s) before making a decision to invest. Valuation date – January 31, 2018. The date of enrolment for SWP has been assumed on the first working day of every month. If the same is a non-business day, then the NAV of next business day has been taken into consideration for calculation purposes. In the above calculations, it has been assumed that investor falls under highest tax bracket (i.e. 30%) and total income of the investor does not exceed Rs. 50 lacs. The prevailing tax rates are as per Finance Act 2017. Tax rates could change in future and investors should consult tax advisors for the same. Gains on the redemption of units of mutual fund are treated as capital gains for income tax purpose. For equity-oriented schemes, gains on the investment for <=1 year are treated as Short-Term Capital Gains (STCG) and taxed at 15% while gains on investment greater than 1 year are treated as Long-Term Capital Gains (LTCG) and are exempt as per current tax regulations. Calculations of tax include the amount of tax plus surcharge. At the time of the redemption of units, redemption amount comprises two parts. One is the invested amount and the other is gains on the invested amount. STCG/LTCG tax is applicable only on the gains made on the redemption units. In case of Systematic Withdrawal Plan (SWP), at the time of redemption of each instalment, investor needs to pay STCG/LTCG tax only on the gains part and not on the invested amount. Over a period of time with market appreciation, in each SWP instalment, invested amount (principal) component decreases and growth/gains part increases. Thus it helps the investor over a period of time to consume less principal amount and thereby allowing the balance principal amount to grow further. Please note that unlike the traditional investment avenues like PPF, NSC, Bank FD, investment in mutual fund is subject to market risks. Hence, the performance of these asset classes is not strictly comparable.

Please note that in the Union Budget 2018, it has been proposed to introduce Long Term Capital Gains (LTCG) on equity oriented mutual fund schemes. LTCG from sale of equity shares and equity mutual fund schemes are proposed to be taxed at 10%, if an individual’s total capital gains cross Rs1 lakh. Currently, there is no LTCG tax if one holds the equity mutual fund units for more than a year. The Union Budget 2018 has proposed that all gains up to January 31, 2018 will be grandfathered. Only the Gains that would arise after January 31, 2018 would be considered. Education Cess is also proposed to change to 4%. Also, Exemption interest income on fixed deposits with banks has been proposed to be increased from Rs10,000/- to Rs50,000/- for Senior Citizens and TDS shall not be required to be deducted on such income, under section 194A. These changes have not been taken into consideration in the above illustration. The proposed changes could lead to increase in tax liability of investor for withdrawal made through SWP. Investors are requested to consult their tax / financial advisor before taking decision of investment / opting for Bandhan SWP facility.