Systematic Withdrawal Plan — Calculate monthly income, remaining corpus & total returns from your mutual fund investment
| Year | Opening Balance (₹) | Returns Earned (₹) | Withdrawn (₹) | Closing Balance (₹) |
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A Systematic Withdrawal Plan (SWP) is a facility offered by mutual funds that allows investors to withdraw a fixed amount at regular intervals from their lump sum investment. Unlike SIP where you invest regularly, in SWP you withdraw regularly while the remaining corpus continues to earn returns. It is an excellent tool for generating a steady post-retirement income or regular cash flow from your investments.
The SWP calculator uses the following formula to compute your returns:
Final Value = PMT × [(1 + r/n)^(nt) – 1] / (r/n)
Where:
PMT = Withdrawal amount per period
r = Expected annual rate of return
n = Number of compounding periods per year
t = Investment period in years
Each period, returns are calculated on the remaining balance, the withdrawal amount is deducted, and the new balance carries forward. This creates a month-by-month (or quarter-by-quarter) schedule showing exactly how your corpus depletes or grows over time.
Regular Income Stream
SWP provides a predictable and steady cash flow, making it ideal for retirees, senior citizens, or anyone needing regular income from their investments without redeeming the entire corpus at once.
Capital Appreciation Potential
Since only a portion is withdrawn periodically, the remaining investment stays in the market and continues to generate returns, potentially growing your wealth over time.
Tax Efficiency
SWP withdrawals are treated as partial redemptions. Only the capital gains portion is taxable, while the principal amount returned is tax-free. This can be more tax-efficient than other income sources.
Flexibility
You can customize the withdrawal amount, frequency (monthly, quarterly, half-yearly, yearly), and duration based on your financial needs and goals.
Each SWP withdrawal is treated as a partial redemption of mutual fund units. Tax is applicable only on the capital gains portion:
Equity / Equity-Oriented Funds
STCG (≤ 12 months): 20% + surcharge & cess
LTCG (> 12 months): 12.5% on gains above ₹1.25 lakh per year + surcharge & cess
Debt Funds (invested after April 1, 2023)
Gains are taxed at your applicable income tax slab rate. No indexation benefit is available.
Under the FIFO (First In First Out) method, the oldest units are redeemed first, which can help maximize tax-free principal return in the early years of your SWP.
Who should use an SWP?
SWP is ideal for retirees, senior citizens, freelancers, or anyone who has accumulated a lump sum corpus and wants to generate regular income without depleting their entire investment. It is also useful for those who want to supplement their pension or salary with additional monthly income.
What is a safe withdrawal rate?
A safe withdrawal rate is the percentage of your corpus you can withdraw annually without risking early depletion. For Indian investors, a rate between 4% to 6% per year is generally considered sustainable for long-term retirement planning, depending on expected returns and inflation.
Can I change my SWP amount or stop it?
Yes, most mutual fund houses allow you to modify, pause, or stop your SWP at any time. You can increase or decrease the withdrawal amount, change the frequency, or even switch to a different scheme, subject to the AMC's terms and conditions.
What happens if my corpus runs out before the planned duration?
If the withdrawal amount exceeds the returns generated, your corpus will deplete over time. Our calculator shows you exactly when this might happen. You can adjust the withdrawal amount or expected return to ensure your corpus lasts your desired duration.
Is SWP better than FD for regular income?
SWP from mutual funds can potentially offer higher returns than fixed deposits over the long term. However, mutual fund returns are market-linked and not guaranteed. FDs offer fixed, predictable returns but typically at lower rates. SWP also offers better tax efficiency for equity funds compared to FD interest taxation.
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