RetirementFinancial Glossary
SWP (Systematic Withdrawal Plan)
Definition
A facility that allows you to withdraw a fixed amount from your mutual fund investment at regular intervals — monthly, quarterly, or annually. The remaining amount continues to stay invested and earn returns. SWP is commonly used to generate regular income in retirement.
Why It Matters
SWP from a balanced advantage fund or hybrid fund is a tax-efficient way to generate retirement income. Unlike FD interest (taxed at slab rate), SWP withdrawals from equity-oriented funds held over 12 months are taxed at 12.5% LTCG (with Rs 1.25 lakh exemption). A Rs 1 crore corpus with 7% SWP yields Rs 58,333 per month.