Hello my dear friend, Are you planning to do SWP mutual fund investment in the current year? Then you are in a right place. Investing in mutual funds isn’t only about growing wealth it’s also about managing it wisely. While many investors are familiar with SIPs (Systematic Investment Plans) to build their portfolios, fewer understand the powerful opposite side of that coin SWP (Systematic Withdrawal Plan). So, what is SWP, and how can it help you generate a regular stream of income from your investments? Let’s explore this concept in detail.
Many people searching for the best mutual fund plans to make passive monthly income in their retirement age so their first choice is SWP investment but before start doing any investments try to know the complete pros and cons. Here we created this guide to share the complete details about systematic withdrawal plan below. Okay, let’s get started.
What is SWP in Mutual Fund?
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 investments.
It’s a disciplined way to generate regular income, especially useful for retired individuals, freelancers, or anyone seeking predictable cash flow from their portfolio.
When you start an SWP, you instruct the fund house to redeem a certain number of units periodically and credit the equivalent amount to your bank account. The remaining corpus continues to stay invested, earning potential returns over time. Let’s see how swp work in detail. Use our SWP Calculator to estimate your potential monthly withdrawals.
How Does a Systematic Withdrawal Plan Work?
Let’s understand how an SWP functions step-by-step:
- You invest a lump sum amount in a mutual fund scheme.
- You decide the withdrawal amount and frequency (e.g., ₹10,000 per month).
- The fund redeems a proportionate number of units each time based on the NAV (Net Asset Value) on the withdrawal date.
- The remaining balance continues to stay invested and benefits from market appreciation.
This allows investors to enjoy liquidity + growth a balance rarely achieved through fixed deposits or traditional savings options.
Example: Systematic Withdrawal Plan (1-Year Illustration)
| Month | Opening Balance (₹) | Monthly Withdrawal (₹) | Growth Rate (0.7% per month) | Closing Balance (₹) |
| 1 | 5,00,000 | 10,000 | +3,500 | 4,93,500 |
| 2 | 4,93,500 | 10,000 | +3,444 | 4,86,000 |
| 3 | 4,86,000 | 10,000 | +3,402 | 4,79,402 |
| 4 | 4,79,402 | 10,000 | +3,356 | 4,72,758 |
| 5 | 4,72,758 | 10,000 | +3,309 | 4,66,067 |
| 6 | 4,66,067 | 10,000 | +3,262 | 4,59,329 |
| 7 | 4,59,329 | 10,000 | +3,215 | 4,52,544 |
| 8 | 4,52,544 | 10,000 | +3,168 | 4,45,712 |
| 9 | 4,45,712 | 10,000 | +3,120 | 4,38,832 |
| 10 | 4,38,832 | 10,000 | +3,072 | 4,31,904 |
| 11 | 4,31,904 | 10,000 | +3,023 | 4,24,927 |
| 12 | 4,24,927 | 10,000 | +2,974 | 4,17,901 |
Result: After 12 months, you’ve withdrawn ₹1,20,000 while still retaining ₹4,17,901 invested and it has continued to grow!
Why Choose an SWP Investment?
- Regular Income Stream
SWP provides a steady and predictable income, making it ideal for retirees or individuals seeking consistent cash flow without liquidating the entire investment.
- Market-Linked Returns
Unlike fixed deposits, the remaining amount stays invested, continuing to earn market-linked returns, which may enhance long-term gains.
- Tax Efficiency
SWP withdrawals are treated as redemption of units, meaning only the capital gains portion is taxed, not the entire withdrawal.
- Short-term gains (if held < 3 years in debt funds) are taxed at slab rates.
- Long-term gains (if held > 3 years) attract a 20% tax with indexation benefits.
This makes SWP potentially more tax-efficient than interest-bearing instruments like FDs.
- Flexibility
You can choose:
- Withdrawal amount
- Frequency (monthly, quarterly, etc.)
- Start or stop anytime without penalty
- Compounding Advantage
The remaining corpus continues to compound, helping you sustain your investment longer while enjoying periodic withdrawals.
Types of SWP Plans
- Fixed Withdrawal SWP: A pre-decided fixed amount (e.g., ₹10,000/month) is withdrawn regularly.
- Appreciation Withdrawal SWP: Only the gains or appreciation earned in the fund are withdrawn keeping the principal amount intact.
- Customized SWP: Some fund houses allow investors to tailor withdrawals as per personal needs, such as varying frequency or amount over time.
Who Should Invest in SWP?
SWP is best suited for the below peopl. If you also fit in the below category then you must go with any suitable SWP plan.
- Retirees looking for monthly income.
- Freelancers or self-employed individuals with irregular income.
- Conservative investors who want regular payouts with partial exposure to equity or debt.
- Goal-based planners who want controlled withdrawals for children’s education, EMIs, or lifestyle expenses.
SWP vs SIP- Understanding the Difference
| Feature | SIP (Systematic Investment Plan) | SWP (Systematic Withdrawal Plan) |
| Purpose | Regular Investment | Regular Withdrawal |
| Cash Flow Direction | From Bank → Mutual Fund | From Mutual Fund → Bank |
| Ideal For | Wealth Accumulation | Wealth Utilization |
| Suitable For | Working Professionals | Retirees / Income Seekers |
| Taxation | On Redemption Only | On Withdrawn Capital Gains |
Both serve opposite purposes but are equally powerful tools for financial planning.
Benefits of Starting an SWP Early
- Peace of Mind: You receive regular income without worrying about market volatility.
- Customizable: Choose schemes based on risk appetite equity SWPs for growth, debt SWPs for stability.
- Inflation-Adjusted Income: The corpus continues to grow, potentially offsetting inflation.
- Wealth Preservation: Partial withdrawals prevent unnecessary depletion of the investment.
These are the top reasons for thousands of people looking for swp mutual fund. For the above benefits many investers planning to do SWP in the upcoming years.
Formula to Calculate SWP Withdrawals
You can calculate the SWP withdrawal amount using this formula:
Withdrawal Amount = P × r / [1 − (1 + r)⁻ⁿ]
Where:
- P = Total investment (Principal)
- r = Periodic rate of return (annual return ÷ 12)
- n = Number of withdrawal periods
This formula helps estimate the sustainable monthly withdrawal based on your corpus and expected return rate.
Things to Consider Before Starting an SWP
- Choose the Right Fund: Select schemes with consistent performance and low volatility.
- Plan the Withdrawal Rate: Ideally 6–8% annually to ensure corpus longevity.
- Understand Exit Loads: Some funds may charge exit loads for early withdrawals.
- Tax Implications: Know the short-term and long-term capital gains rules.
- Market Timing: While SWP reduces volatility impact, avoid starting during extreme market peaks.
How to Start an SWP in Mutual Fund?
- Invest a Lump Sum in your preferred mutual fund scheme.
- Register an SWP Request with your AMC or mutual fund platform.
- Choose the Withdrawal Amount and Frequency.
- Select the Start Date (e.g., 1st of every month).
- Monitor and Adjust based on your cash flow needs.
Most online investment platforms and fund houses like Groww, Zerodha Coin, and Bajaj Finserv allow SWP setup in a few clicks.
Top Advantages of SWP over Traditional Income Options
| Feature | SWP | Fixed Deposit / Monthly Income Scheme |
| Return Type | Market-Linked | Fixed Interest |
| Liquidity | High (Can stop anytime) | Low (Lock-in period) |
| Taxation | On Capital Gains | On Full Interest |
| Flexibility | Full (Amount, Frequency, Duration) | Limited |
| Growth Potential | High (Corpus Continues to Grow) | Low |
This makes SWP a modern, flexible, and tax-efficient alternative for steady income generation.
FAQs on Systematic Withdrawal Plan
1. What is SWP investment in mutual fund?
- An SWP is a facility that allows you to withdraw a fixed amount periodically from your mutual fund investment, offering a steady income while keeping the rest invested.
2. Is SWP good for retirees?
- Yes, It’s an excellent option for retirees who want a regular income stream without losing exposure to market growth.
3. Can I change or stop my SWP anytime?
- Absolutely, You can modify or stop your SWP anytime without any penalty or restriction.
4. Is SWP taxable?
- Yes, but only the capital gains portion is taxable not the entire withdrawal. This makes it more tax-efficient than fixed deposits.
5. Which type of mutual fund is best for SWP?
- Hybrid or balanced advantage funds are ideal, offering stability with modest growth. However, debt funds are better for low-risk investors.
Final Thoughts
A Systematic Withdrawal Plan (SWP) is not just a withdrawal mechanism it’s a smart financial strategy to convert your investments into a steady income stream while keeping your money working for you. It offers the best of both worlds liquidity and growth, making it an ideal post-retirement or passive income tool.
When executed strategically with the right fund choice, disciplined withdrawal rate, and long-term perspective an SWP can help you preserve capital, beat inflation, and ensure consistent cash flow. Whether you’re a retiree seeking monthly income or an investor looking to plan future expenses efficiently, SWP in mutual funds is a reliable and tax-smart approach to achieve financial stability with flexibility.
I hope the above guide will help you to know more about Systematic Withdrawal Plan and its benefits. If you still have any queries related to SWP please feel free to contact us. We are always ready to provide a valuable answers as soon as possible. Follow this site for more mutual fund related guides. Thanks for your visit.
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