A Systematic Withdrawal Plan (SWP) lets you draw regular income from mutual fund investments. Use our free SWP Calculator India to see how long your corpus lasts or how much you need for target income. Part of our Complete Salary & Tax Guide for India.
What Is SWP?
SWP is the opposite of SIP — instead of investing regularly, you withdraw a fixed amount monthly from your mutual fund corpus. The remaining balance continues earning returns.
How SWP Works — Corpus Depletion Math
Each month, returns are added to the corpus, then your withdrawal is deducted. If monthly returns exceed withdrawals, the corpus grows. If withdrawals exceed returns, the corpus shrinks over time.
SWP vs FD Interest
FD interest is fixed and never touches principal. SWP withdraws from corpus but can earn higher returns in equity funds. A ₹50 lakh FD at 7% yields ~₹29,167/month interest indefinitely; SWP at 8% on the same corpus may sustain ₹25,000/month for 20+ years while potentially earning more overall.
When Does Corpus Never Deplete?
When monthly return ≥ monthly withdrawal at the start: corpus × annual return / 12 ≥ monthly withdrawal. At 8% return, ₹37.5 lakh sustains ₹25,000/month indefinitely.
SWP Tax Implications
Equity funds: LTCG 12.5% on gains above ₹1.25 lakh/year (held > 12 months), STCG 20% (held ≤ 12 months). Debt funds: taxed at slab rate regardless of holding period.
Best Use Cases for SWP
Early retirement income, supplementing pension, post-retirement cash flow, and bridging the gap before SCSS or annuity kicks in.
SWP vs SCSS vs RD for Retirees
SCSS offers guaranteed 8.2% for seniors (₹30 lakh limit). RD builds corpus via deposits. SWP offers flexibility and potentially higher equity returns but with market risk and corpus depletion.
Related: SIP Calculator (reverse of SWP), FD Calculator, NPS Calculator, FD vs SIP comparison.
Frequently Asked Questions
How does SWP work in mutual funds?
In a Systematic Withdrawal Plan (SWP), you withdraw a fixed amount from your mutual fund corpus every month. The remaining corpus continues to be invested and earns returns. If the returns are higher than your withdrawals, the corpus can grow indefinitely. If withdrawals exceed returns, the corpus gradually depletes.
How much corpus do I need for SWP of ₹25,000 per month?
At an 8% annual return expectation over 20 years, you would need approximately ₹30 lakhs in corpus to sustain ₹25,000/month withdrawals. If you want the corpus to last indefinitely (self-sustaining), you need corpus × 8%/12 ≥ ₹25,000, meaning a corpus of at least ₹37.5 lakhs.
Is SWP from mutual funds taxable?
Yes — each SWP withdrawal that results in gains is subject to capital gains tax. For equity mutual funds held over 12 months: 12.5% LTCG on gains above ₹1.25 lakh annually. For equity held under 12 months: 20% STCG. For debt mutual funds: gains taxed at your income slab rate regardless of holding period.
SWP or FD interest — which is better for retirement income?
FD interest preserves the principal (never depletes) but returns are fixed at 7-7.5% and fully taxable. SWP from equity mutual funds can potentially generate higher returns (8-12% historically) but the corpus depletes over time unless returns exceed withdrawals. SWP from balanced or hybrid funds offers a middle ground of growth potential with lower volatility.