Monthly Income Plans vs SWPs for NRIs- Which Should You Choose?

Yes, NRIs can invest in MIPs and set up SWPs, as per the FEMA guidelines. You can invest in this, using your NRE or NRO account, completing the NRI KYC. Considering this, due to FATCA compliance requirements, NRIs living in the USA and Canada on certain Indian investment schemes face restrictions.

MIP dividends are taxed under the head of "income from other sources" with 20% TDS plus surcharge and cess. However, on SWPs, tax is imposed on the capital gain portion of the withdrawal amount. Considering this, for equity funds, the STCG is 20% and LTCG is 12.5% on the amount more than INR 1,25,000. Further, debt funds are taxed at up to 30% of the slab rate.

It, instead of a payout method, depends on the underlying fund. MIPs are a product category, i.e., debt-oriented hybrid funds with a 7-10% annual return. Compared to this, SWP is are facility, in which returns depend on your chosen fund type. For instance, you could set SWP on a debt fund for lower returns and risk or an equity fund for higher returns and risk. Further, in terms of tax efficiency, SWP  generally saves 5-8% annually compared to MIP dividends.

The withdrawal amount depends on your target and corpus sustainability. Generally, financial experts for long-term sustainability advise 6-8% of your corpus annually. Further, the exact withdrawal amount depends on your time horizon and expected returns from the fund.

Yes, you need to file ITR in India for MIP or SWP income, if under the new tax regime, your total India-sourced income is more than INR 4,00,000. It is mandatory for refunds, tax compliance, and even if TDS covers your taxes.

The SWP 4 rule is a retirement income guideline that states that, through SWP, one should not withdraw more than 4% of their initial retirement corpus annually. Further, this amount helps your savings last for a minimum of 30 years. It is adjusted for inflation each subsequent year.