We have been answering some frequently asked questions on SIPs in a three-part series. Here is the third and concluding part.
If I start an SIP in the dividend option of a scheme, will I get the dividend even before the SIP’s tenure is completed?
The investor is eligible to receive the dividend during the SIP tenure if the fund declares a dividend during that period.
Dividend will be distributed at the discretion of the trustee from the available distributable surplus, if any.
The dividend, when declared, will be paid (subject to deduction of tax at source, if any) to those unit holders whose names appear in the register of unit holders on the ‘record date’ of the dividend.
If in the application form the investor has opted for dividend reinvestment, the dividend amount will be invested in the fund and units will get accumulated.
If the investor opts for dividend payout, the dividend amount will be credited to the account of the investor.
Should the monthly instalments be of the same amount?
In general, SIP monthly instalments are given for the same amount through the tenure of the SIP.
However, mutual funds also offer SIPs with special features such as step-up SIP (where the SIP instalment amount can be stepped up at defined intervals).
Will the units allotted in my SIP differ every month?
Yes. Units allotted will be equal to the amount invested/applicable NAV. The applicable NAV is the NAV for the SIP date.
Thus, the units allotted will differ depending on the applicable NAV on the SIP date.
If the SIP date during a particular month is a holiday, units will be allotted at the applicable NAV on the subsequent working day.
Is SIP available for all categories of funds, i.e., equity/ fixed income/ liquid schemes?
Yes. SIP can be set up for equity and fixed income funds. Some mutual funds allow SIP for liquid schemes as well.
Can I claim tax rebate if I opt for SIPs in ELSS schemes? If the lock-in period is for three years, can I redeem the entire amount invested after the lock-in period or is every SIP instalment locked in for three years?
Yes. You can claim tax rebate as applicable for investing in an SIP under the ELSS scheme. However, every SIP instalment is locked in for three years.
Will I receive reminders before my SIP date?
Yes, investors will receive an SIP due alert five days before the next SIP date, provided they have registered their email address and mobile number. The investor is also sent an email/SMS alert for SIP renewal at least a month before the expiry.
Will I be able to change the “end date” of SIP already registered?
It is not possible to change the “end date” once the SIP is registered.
Contributed by CAMS Viveka. Views expressed are general practices in the MF industry and may vary on a case-to-case basis
This article was originally published in The Hindu Business Line on on February 15, 2015
