How to withdraw SIP (Systematic Investment Plan) is an investment method which is very important to know about. In which the investor invests a fixed amount in mutual funds every month. This is for a long time, especially it is called a disciplined long term investment strategy. Which helps in increasing the money over time.
SIP is an investment plan especially for the long term, and you get benefits only if you invest in it for a long time. But sometimes due to sudden problems, the investor thinks of withdrawing it. Such as any emergency expense, any accident or dissatisfaction in investing.
At such a time, when the investor withdraws the money, it becomes very important for him to understand some things, because when the investor withdraws the money, he has to bear the loss of a lot of penalty or unnecessary tax. Due to lack of correct information, the investor has to bear the loss in the withdrawn money, so it is very important to use the future plans in a better way and to have the correct information.
Types of SIP withdrawal
There are three main types of withdrawals from SIP.
- Partial withdrawal
- Full withdrawal
- SWP(systematic withdrawal plan)
Partial withdrawal:-
You can use this option when you need less money. Because in this you can withdraw some amount of your deposited investment. And the remaining amount remains deposited in the mutual fund. This is beneficial when you need less money in an emergency.
Full withdrawal:-
You can use this option when your investment period is over or you want to stop the investment. In both these processes, you can withdraw your SIP investment together.
SWP (Systematic withdrawal plan):-
You can use this option every month in which you get a fixed amount every month. This option is used when it becomes a permanent source of income, especially when you are in retirement. In this, you also need to pay attention to the various types of taxes and charges in every option.
Important things to keep in mind before withdrawing money:-
Whenever you want to withdraw money from SIP, it is very important for the investor to know some important things before that. So that you do not suffer financial loss.
1.Lock-in-period:-
If you have invested in ELSS (Equity Linked Saving Scheme), then this investment process is locked-in for 3 years. You cannot withdraw your invested money before 3 years.
2. Exit load charge:-
In some mutual fund schemes, if you want to withdraw your money early, then an exit load fee is charged. It is usually applied on withdrawal within 1 year from the date of your investment.
3.Tax implication:-
When you want to make short-term profit (STCG) and long-term capital gain (LTCG) in the investment period, then you are taxed on it. And its rate depends on the period of different types of investment and type of fund.
4.Special proof of NAV:-
If you plan to withdraw your money, then your amount is decided by the NAV at the time of withdrawal, that is why you always need to keep an eye on your market situation.
How to withdraw SIP amount (from AMC website or app)
Most investors invest using mobile apps. So, to withdraw SIP amount, you can directly take help of AMC (Asset Management Company) website or mobile app in which you have invested. Here you are being told the step by step process through which you can easily withdraw your money.
1. Login process: In this process, first of all you have to go to the website of AMC through their app, login with your registered user ID and password.
2. Fund selection: After going to the website or app, login, go to the section of My investment or Portfolio and select the mutual fund scheme in which you have done SIP.
3. Select the type and amount of withdrawal: In this, you can choose the option of partial amount or full amount withdrawal, enter this amount.
4. Confirmation of transaction: After all the details are complete, click on the “Redeem” or “Submit” button to check them and you will get a confirmation message.
Which time is right to withdraw SIP amount
There is no specific time to withdraw SIP amount, it depends on your personal need and investment objectives.
1. Fulfilment of financial goal: Every investor invests for some future plans. In such a situation, if you have invested for a specific goal like buying a house, children’s education or retirement. Now you feel that your goal has been achieved, then this time is considered better to withdraw the amount.
2. Market timing and goal best plan: Many investors also invest on the basis of the movement of the stock market. Market timing can be risky for you. It is appropriate for you to withdraw according to your financial target.
3. Emergency situation: If you face any kind of emergency or medical emergency, then withdrawing money from SIP is considered a practical decision.
SIP withdrawal options
SIP is an investment that you can use in many ways. It is not right to withdraw money from it every time. Sometimes, by adopting some good options, you can fulfill your needs without breaking your investment.
1. Pausing SIP permanently (pause SIP)
In this, you are given a special facility. If you are not able to invest right now, then SIP gives you this facility for some time. Most AMCs provide this facility.
2. Switching funds (switch funds)
If you have invested in a fund and its performance is not good, then you can withdraw money from it and invest in a fund that is performing better.
3. Set SWP instead of lump sum amount
Through SWP (systematic withdrawal plan), you can withdraw a fixed amount every month, which will maintain your regular income and your investment will also continue in a better way.
Tax effect on SIP withdrawal
At the time of SIP withdrawal, it is important to know about tax because it can affect your returns.
1. Equity Mutual Fund vs Debt Mutual Fund:
If you are withdrawing from equity fund before 1 year, then you have to pay 15% short term capital gain (STGC) tax and if you hold for more than 1 year, then you will not have to pay any tax on the profit up to ₹ 1 lakh and 10% long term capital gain (LTGC) tax is levied on more than this. On the other hand, if you hold for less than 3 years in debt funds, the profit is taxable as per your tax slab.
2. Holding period
You should plan for withdrawal after understanding everything before withdrawal because tax on profit depends on the period for which you have invested, therefore it is very important to know about the important things.
Common mistakes made in SIP withdrawal
While withdrawing money from SIP, many investors often make small mistakes, due to which future financial growth is also affected, it is very important to pay attention to them.
1. Withdrawal without checking the lock in period
Especially in ELSS funds, investment is made for 3 years and if you try to ignore it, then your transaction may get rejected.
2. Not paying attention to exit load and tax
Whenever you want to withdraw money from SIP, whatever be the situation, if you withdraw in a hurry, then exit load and tax can be cut, due to which your return is reduced significantly, so first withdraw money after getting information about all the charges.
3. Obstacle in long term wealth creation
Your repeated withdrawals without fulfilling the terms and conditions of the investment period affect the long term compounding benefits, which can keep your big financial goal incomplete.
Conclusion
SIP is a very good and effective way of investment, through this people invest for their financial plans and emergency situations, but whenever you withdraw, it is very important to know some things, through this article we have learned that partial, full and SWP withdrawal of money is possible. But before this, it is also important to understand aspects like lock in period, tax and exit load based on the information given in it. You always have to pay special attention to the fact that SIP withdrawal is in accordance with your financial target. Make withdrawals only if your target has been achieved or any emergency situation has arisen. Avoid making any hasty or emotional decisions. Your correct information and correct planning can make your investments more effective.
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