What is Long Term Withdrawal Facility?
Long Term Withdrawal Facility allows you to redeem a fixed sum of money periodically in the most tax efficient manner. By opting for the growth option and not paying high dividend distribution tax Long Term Withdrawal Facility enables a steady flow of income that will help you augment your finances.
Why Opt for Long Term Withdrawal Facility?
Consistent and Regular Cash Flow:
Choose the amount that you need every month and specify the date you want the money, and relax! Every month, the amount will be automatically credited to your bank account.
Predictable Cash Flow
Unlike a Dividend option in a mutual fund scheme, Long Term Withdrawal Facility ensures a fixed monthly amount is paid to you and reduces the uncertainty from unpredictable dividend payments.
Long Term Withdrawal Facility is a tax efficient and convenient way to manage monthly cash flows. Only realized gains each month would be subject to capital gains tax.
There is no Tax Deduction at Source (TDS) for resident investors on redemptions from a mutual fund scheme, so you get to enjoy the full benefits of your investment.
Features of Long Term Withdrawal Facility
Long Term Withdrawal Facility installment amount per month can be fixed at 0.75% or 0.60% or 0.50% of the investment amount and will be rounded-off to the nearest highest multiple of Re. 1. Minimum amount required for availing the said facility is Rs. 1 lakh
Monthly, stable cash flow
Start getting cash flows from the immediately following month, provided a minimum time gap of 30 days from the date of request.
How tax efficient is Long Term Withdrawal Facility?
Let us look at an example where an investor (Resident Individual/HUF) invests Rs. 10 lakh in one of the schemes with Long Term Withdrawal Facility, opting for a 0.75% Long Term Withdrawal Facility every month, on the invested amount. For the sake of ease, we shall assume that the NAV grows at a constant rate of 9% per annum.