Danger of hidden charges in SIP! Every investor needs to know; Understand the full account here

SIP installment failure penalty: Systematic Investment Plan (SIP) is a popular and disciplined way of investing, but it is equally important to understand the charges associated with it. Often investors focus only on returns and ignore small charges. These small costs can turn into huge amounts over time and affect your overall wealth.

Penalty is imposed if installment fails

If there is not sufficient balance in your bank account and the SIP installment is not deducted, then the bank can charge Rs 250 to Rs 750 on every failed transaction. Apart from this, 18% GST is also applicable on it. This charge can be imposed on different SIPs every time, due to which the loss increases.

How the loss increases till 2950

Suppose you have 5 SIPs running in the same day and all the installments fail. If an average charge of Rs 500 per transaction is made, the total fine will be Rs 2500. After adding 18% GST on this, the total loss can reach approximately Rs 2950. This amount can be repeated every month.

It is risky to have SIP on the same date

Many investors set all their SIPs on the same date for convenience. But if the balance decreases on that day, then all the installments may fail together. The thing to note is that the charge is per transaction and not per day. Therefore, if multiple SIPs fail simultaneously, the penalty increases manifold.

How does NACH system work?

SIP in India usually operates through the National Automated Clearing House (NACH) system, which is operated by the National Payments Corporation of India (NPCI). This system allows asset management companies to automatically debit money from your bank account on a scheduled date. Therefore, it is very important to maintain adequate balance on time, so that unnecessary charges can be avoided.

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