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Need to withdraw funds from mutual fund, PPF, NPS, FD? Check eligibility, tax implications

Need to withdraw funds from mutual fund, PPF, NPS, FD? Check eligibility, tax implications

Need to withdraw funds from mutual fund, PPF, NPS, FD? Check eligibility, tax implications
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By Anshul  May 19, 2020 9:46:50 PM IST (Updated)

Amid coronavirus pandemic, many people are facing liquidity crunch and are considering withdrawal from their investment schemes such as mutual fund, Public Provident Fund (PPF), National Pension System (NPS) and fixed deposit (FD).

Amid coronavirus pandemic, many people are facing liquidity crunch and are considering withdrawal from their investment schemes such as mutual fund, Public Provident Fund (PPF), National Pension System (NPS) and fixed deposits (FD). While these withdrawals may look essential, it’s also important to understand their eligibility and tax implications.

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Here are the eligibility and tax implications of mutual fund, PPF, NPS and FD:
Mutual Fund
Mutual fund provides exit options depending on the chosen fund type. In case of emergencies, investors have the option to withdraw from their mutual fund. However, every withdrawal done is taxable according to the holding period.
“If one decides to withdraw money sooner, specifically within one year of making equity investment, then gain is taxed at flat 15 percent. This is called short-term capital gains tax. This rate does not depend on the income slab. If one decides to withdraw from equity mutual fund units after 12 months, the gain, called long term capital gain, is taxed at 10 percent,” according to Scripbox – a mutual fund investment platform.
National Pension System (NPS)
A government-sponsored pension scheme, NPS allows investors to withdraw only after the completion of three years. The NPS withdrawal amount cannot exceed 25 percent of contributions made by the subscribers. Such withdrawals are tax free under Income Tax laws.
The subscribers can make a partial withdrawal a maximum of three times during the entire tenure of subscription under NPS.
Public Provident Fund (PPF)
PPF allows partial withdrawal after seventh year with some limitation. These are exempt from income tax.
Fixed Deposits (FDs)
Fixed deposits, with premature withdrawal facility, allow the depositor to close the FD before the date of maturity. However, liquidating a fixed deposit before the end of its term attracts certain penalty charges. The penalty charges usually range between 0.5 percent and 1 percent. Some banks also offer a premature withdrawal facility with zero penalty charges.
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