11 Things About Systematic Investment Plans You Should Know

11 Things About Systematic Investment Plans You Should Know

Systematic Investment Plans

Rajat, one day while celebrating his 30th Birthday with his family and friends. It was a great day and Rajat has just turned 30 yrs old. While discussing different topics after the party with his friends, he got to know that many of his friends are investing in Mutual Fund Systematic Investment Plan and generating great future returns.

He got curious and asked his friends about this plan and what is the systematic thing that’s generating great returns in the future. He started researching and found out that around Rs. 8000 crores are invested every month through Systematic Investment plans. So, what is this plan, and how you can invest in this plan to generate higher returns? Let’s start.

What is a systematic investment plan (SIP)?

The Short form of a Systematic Investment Plan is SIP. For simplicity, we will call it SIP only. So, what exactly is SIP and how does it work?
SIP is a simple and risk-aversing medium to do investments in the stock market. It is extremely safer than equity shares, which are extremely volatile based on share market upwards conditions or downward conditions.
Whereas, investing in SIP is much safer and risk-free. Let’s discuss how SIP is safer.

Is SIP safe or not?

The SIP is much safer than investing in the share market directly and investing in equity shares. The Mutual funds are still subject to market ups and downs but that’s a rarity as the mutual funds are handled by experts, not by shareholders.

Handled by Fund managers – The mutual funds are handled by fund managers who handle your money and invest in different sectors of the financial market. These fund managers are highly experienced and invest with great experience.

Not only in equity shares – The fund managers invest money not only in shares but also in hybrid funds, debt funds, index funds, etc. Know more about how to manage investment risk in Sip mutual funds.

Are SIP returns taxable?

The main Systematic Investment Plan as in Mutual funds maturity is not taxable. This also depends upon the type of mutual funds you are investing in, and during the time of redemption of your investment from that fund. Generally, under all circumstances, if you are redeeming your mutual fund investment after a year, then there is zero tax on them.
But, if you remove your investment before a year, then it can levy 15% of tax on your returns.

Tax under every SIP is calculated based on individual SIPs. This directly states that tax will be calculated on every separate SIP statement.

Can SIP save tax?

If you are searching for a tax savings plan in SIP then you have to invest in Mutual funds under ELSS. You can further claim under tax deductions of up upto Rs. 1.5 Lakhs. This can be done under section 80C for ELSS Mutual funds. You have to take into consideration that all your mutual fund SIP amounts should be a maximum of Rs. 1.5 lakhs. If more than Rs. 1.5 lakhs, then you will get no tax deductions.

Can SIP be stopped?

The simple answer is Yes, you can stop your SIP whenever you want. Unlike the Fixed Deposit or FD, which cannot be stopped. The SIP can be stopped whenever. Now, you have the option of redeeming your money or letting the fund still be in the SIP. You can either extract your fund or let it sit in the SIP for the future. This depends on your choice.

Can the SIP amount be reduced/increased?

If you want to increase or decrease your SIP amount, then the answer to that is, this step is highly complicated and complex. Changing your SIP amount is not easy. You can either think of starting a fresh SIP with a new amount. If that mutual fund is unable to initiate a new SIP, then don’t think of canceling it. Try starting a different Mutual fund with different amounts.

Can SIP be started online?

In the internet age, the answer to this question is yes. You can easily start a SIP through an online process. SIP also provides the option of online investing. You can start a SIP while sitting in your home.

Is SIP better than RD?

Yes. The Systematic Investment Plan provides much higher returns than the RD. The SIP provides a much better return always. Although, the returns incurred on SIP depend directly on which mutual fund you invested in. You should invest depending upon the high-risk or low-risk funds, which you are ok with.

Is SIP good for the long term?

The simple answer is yes. SIP is good for long-term investment. You should start investing today, with any amount you have saved up and invest in SIP Mutual Funds. Always try to invest in Mutual funds. Also, when you invest in the long term, you stop worrying about short-term ups and downs of the market and your investments go larger and larger thus attracting great returns.

Are SIP and mutual funds the same thing?

The answer is not that simple but No. SIP and Mutual funds are not the same. The simple answer is like this, While every Systematic Investment plan can be put under Mutual Fund, every Mutual Fund cannot be categorized in SIP. In SIP the investors go for the option of periodic systematic investment of funds combining it into a lump-sum amount of investment. This is the difference between SIP and Mutual funds. Instead, you should be asking, what type of Mutual should I be investing in?

Which SIP to invest in?

There are many great SIP Mutual Funds that you can invest in, that can give great returns. Some of them are:
Quant Active Fund, that can provide returns of 25.99%.
Parag Parikh Flexi Fund, which can provide returns of +20.68%
Quant Large and Mid Cap, that can provide returns of +20.21%
PGIM India Flexi Cap Fund, that can provide returns of +18.33%
And many can provide great returns, but these are the top right now, that can provide the best returns according to stable market conditions.


Now, you have cleared all the doubts related to Mutual Funds and SIP. We at Wealthcare have provided the most accurate information regarding all the queries related to Systematic Investment Plan and questions regarding that. Hope, you move ahead to do great Mutual fund investments in the future.

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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