Systematic withdrawal plans are good for regular income

I am currently in the exempt tax bracket. I want a regular income. Can I invest in debt schemes with dividend option since DDT has been removed?

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I am currently in the exempt tax bracket. I want a regular income. Can I invest in debt schemes with dividend option since DDT has been removed? Also, will this scheme be valid if I purchase the scheme after April 1, 2020?
-Swarandeep Bakshi

A dividend in MF is subject to a distributable surplus. While there would be no DDT, they will apply the 10% TDS if the dividend exceeds Rs 5,000 in a year. Since you need regular income, a systematic withdrawal plan (SWP) may be a better idea. SWP will allow you the flexibility to manage withdrawals far more efficiently. Yes, the new rules come into force from April 1, 2020. You may like to check conservative products like the Senior Citizen Saving Scheme, Pradhan Mantri Vaya Vandana Yojana, Postal Schemes and RBI bonds, subject to eligibility & you being comfortable with the respective lock-in. If your risk profile permits, you may consider a small portion of equity mutual funds as well. This may help you to partly preserve purchasing power.

I am 42 years old. My daughter is 10. I need to build a corpus such that 13 years later, I can have Rs 50 lakh for her marriage and 18 years later, I can have Rs 1 crore on my retirement. Monthly take-home is Rs 75,000 and expenses are Rs 45,000. In which mutual funds should I make monthly SIP investments worth Rs 30,000 to build this corpus? Please advise
- Sagar N Pradhan

Firstly, congratulations on saving at around 40%. Assuming aroubd 11% return in mutual funds, both your goals are comfortably within reach. Suggest you look at a combination of index and actively-managed funds. You can invest Rs 10,000 each in growth option of:
  • 3.3%Annualized Return for 3 year
  • >3 years Suggested Investment Horizon
  • 4.10 YearsTime taken to double money
  • -8.14%Annualized Return for 1 year
  • >3 years Suggested Investment Horizon
  • N.ATime taken to double money
a) UTI Nifty Index Fund or DSP Nifty 50 Index Fund

b) Nippon India - Junior BeES FoF
c) Parag Parikh Long Term Equity Fund

We assume you have a suitable risk profile. Subject to your overall asset allocation permitting, you may like to consider including a debt mutual fund in your portfolio as 100% equity mutual fund portfolios can be very volatile in the short term.

(These mutual fund queries are answered by Rohit Shah, Founder, Getting You Rich)
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