SWP

A Systematic Withdrawal Plan (SWP) is a mutual fund facility that allows investors to withdraw a fixed amount at regular intervals — monthly, quarterly, or annually — from their existing mutual fund investment. It is the reverse of a SIP: while a SIP builds corpus over time through regular investments, an SWP draws down a corpus to provide regular income.

SWP is particularly popular among retirees and those living off investment income. It provides a tax-efficient income stream compared to traditional interest income (from FDs or RDs), since only the gains portion of each SWP redemption is taxed, not the full withdrawal.

Units redeemed per SWP instalment = SWP Amount / NAV on withdrawal date

Remaining units after n withdrawals = Original Units − Σ (SWP Amount / NAV at each withdrawal)

Corpus sustainability check: If the fund's return rate > SWP withdrawal rate → corpus grows or stays stable If the fund's return rate < SWP withdrawal rate → corpus depletes over time

You retire with a corpus of ₹1,50,00,000 invested in a balanced advantage fund with an expected return of 10% per annum. You want ₹60,000/month via SWP.

• Annual SWP withdrawal = ₹7,20,000 (4.8% of corpus)
• Expected annual return = 10%

Since the return (10%) exceeds the withdrawal rate (4.8%), the corpus continues to grow. After 20 years, the remaining corpus is approximately ₹3.6 crore — you withdrew ₹1.44 crore in total yet the corpus more than doubled.

Use the SWP calculator to model your own withdrawal scenario.

• SWP vs FD interest: An FD paying ₹60,000/month requires a corpus of approximately ₹1 crore at 7.2% interest, and the entire ₹60,000 is taxable at slab rates. An SWP giving ₹60,000/month from a ₹1.5 crore equity-linked corpus returns both principal and gains in each withdrawal — only the gains portion is taxed (at 12.5% LTCG after 1 year), making SWP significantly more tax-efficient.
• FIFO for tax purposes: Mutual funds redeem the oldest units first (FIFO). This means if your fund has been held long enough, most SWP redemptions will qualify for LTCG treatment at 12.5% — more favourable than FD interest at your slab rate.
• Corpus depletion risk: If markets fall sharply, you redeem more units at lower NAV to deliver the same SWP amount. This depletes the corpus faster — a phenomenon called "sequence of returns risk." To mitigate this, maintain 12–24 months of expenses in a debt fund to avoid equity redemptions during downturns.
• NPS annuity vs SWP: NPS mandates converting 40% of the corpus into an annuity at age 60, which provides a fixed pension but with no flexibility and the remaining balance dies with you. SWP from a mutual fund offers complete flexibility and the unspent corpus passes to nominees — a key advantage.
• Starting SWP: You can set up SWP from an existing lump-sum investment or from a corpus accumulated through SIP over years. Many investors run SIP during accumulation years and automatically switch to SWP at retirement.