Jan 01, 1970 5 min read

All You Need to Know About SBI Mutual Fund’s Recent Launch: Bandhan SWP

Learn all about Bandhan SWP and know why it is something that you need in your investment portfolio.
Recently, SBI Mutual Fund has come up with a new plan named Bandhan SWP. Right from its initial days it caught several eyes. The reason is that it offers monthly cash flow from an individual's mutual fund investments to their immediate family member. One can receive this payout at a pre-determined time intervals, such as monthly, quarterly, half-yearly, or annually.

It has been rightly said that “little drops of water make the mighty ocean.” And, the theory of this scheme is just the reverse. Here, little water is drawn out in portions according to one’s needs and requirements. Considering the world of mutual funds, SIP is quite a popular form of investment, however, the reverse of SIP, i.e., SWP is a new type of investment which might not be known to everyone.

Let’s learn about such plans as well as this scheme of SBI MF in detail.

What Is Mutual Fund SWP?

SWP is an abbreviation for Systematic Withdrawal Plan. It represents a service offered by mutual funds. Here, the investor is provided with a specific amount of payout at pre-determined intervals which can be monthly, quarterly, half yearly, as well as annually. They offer a facility for regular cash flow.

What Is Different About Bandhan SWP?

Earlier, the SWP was known to provide the benefit of a specific amount of payout to the investor at the pre-set intervals. This time, SBI Mutual Fund has introduced Bandhan Systematic Withdrawal Plan which is a tax-efficient option. Here, it provides the investor’s beneficiary including either a parent, sibling, spouse or a child above the age of 15, with a minimum of ₹5,000 a month for one year by redeeming units.

Why Invest in Bandhan SWP?

In India, it’s the bond of love that connect us all to the other side.” We sincerely believe in the fundamental principle of ‘bandhan,’ and this scheme can be considered as a synonym for it. Earlier, the redeemed amount under the facility was credited to investor’s account only. But now with the investment in Bandhan SWP, your beneficiaries wherein the individual investor can choose any one of his beneficiary for monthly payment while availing systematic withdrawal plan.

With the introduction of regular payout with the extra credit facility, this option is mainly for the people falling in either of the two categories:

  1. Individuals who are seeking opportunities to fulfil living expenses for their loved ones usually after retirement.
  2. People who want to invest with an aim to plan tax.

Planning a happy retirement for your parents? Invest in Bandhan SWP as it can effectively keep your special ones strong even in the old age. It offers them with the freedom to make the most of their life. They can withdraw money from your investments at pre-determined intervals.

Further, you can even plan your investments and withdrawals in a tax-efficient method. Thus, it gives you the potential to earn more returns over a period, as your beneficiary withdraws their share of happiness bit by bit. Here, the capital gains tax will be levied only on the profit, that is, the difference between the acquisition cost and the redeeming value. The tax outgo will increase progressively as the value of the asset increases.

What Are the Benefits That This Scheme Can Provide?

The three significant benefits that one can avail with Bandhan SWP of SBI mutual fund are discussed as follows:

  1. Mutual Fund SWPs assure that your beneficiary gets a fixed amount at a pre-determined time frequency. Among the other options, frequency, and payout of the dividend-paying monthly income plans are not absolute or set beforehand. Sometimes, when the fund is unable to generate sufficient profits, you might have no dividends to be paid. This way, every month you will have different amount coming in, and there can be some months when there might be no money received. For all such issues, SWP is a definite boon.
  2. This scheme is a much better option as far as taxation is concerned. The investor has to pay no long-term/short-term capital gain tax on the sale of his investment as the returns are considered a gift which does not have any tax levy.
  3. There are very few of the fixed income instruments which insulate the investors against the inevitable effect of inflation. The Mutual Fund SWP scores regarding generating returns to keep up with inflation, especially if one opts for the equity fund route.

Who Can Avail the Benefits of This Scheme?

The scheme can facilitate both new as well as the existing SBI mutual fund investors. Those who invest in this one can aim to provide a monthly sum of money from their investments in a growth option of an open-ended fund to any of the immediate family member.

Even the existing ones who have their investments in dividend payouts, as well as dividend reinvestment option can also avail this facility by switching their investments to the growth option. However, there is a limitation to the withdrawal amount which is Rs. 5000 per month for 12 months.

While talking about the attributes of the scheme, SBI mutual funds executive director and CMO D P Singh stated that “the Bandhan SWP is a tax-efficient solution as any fund transfer to the immediate family member is considered as a gift under the law, and thus it does not attract any taxation. The systematic withdrawal plan is more beneficial than a dividend payout option.”

Experts also believe that SWP is the most efficient solution to saving tax for individuals in the current tax regime. The facility is ideal for the middle-aged investors and the ones that are approaching their retirement age. However, as we have discussed earlier that currently the option can be availed for a single relation, may be in the coming time it would be offered for multiple ties as well.

In the end, we would like to conclude saying that in case you are still holding any doubt about the scheme mentioned above, prefer consulting our experts for a customized outlook. Also, it should be noted down that the scheme is only available off-line as of now. Thus, you need to visit the AMC and fill in the form to make your investment. Besides, the main investor needs to be KYC compliant, and the person receiving the fund need not be KYC compliant but should have a bank account.

We hope sooner or later, you will see this one as a part of online investment too. For more such informative blogs, keep visiting us as we share the best recommendations and suggestions on a daily basis.

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