SWP Calculator - Systematic Withdrawal Plan
SWP (Systematic Withdrawal Plan) is a facility offered by mutual funds that allows investors to withdraw a fixed amount at regular intervals (monthly, quarterly, etc.) from their mutual fund investment. The remaining corpus continues to earn market-linked returns.
SWP is popular among retirees and those seeking regular income from their investments while keeping the principal invested for potential growth. Unlike an FD where you only earn interest, in SWP your remaining corpus stays invested in the market and can potentially grow over time.
In a Fixed Deposit (FD), you earn a fixed interest rate and your principal remains unchanged until maturity. The entire interest earned is taxable as per your income tax slab.
In SWP, your withdrawals come from both capital appreciation and your invested amount. The remaining corpus fluctuates based on market returns. Only the capital gains portion of each withdrawal is taxed, not the entire withdrawal amount. This makes SWP potentially more tax-efficient, especially for investors in higher tax brackets.
SWP from equity mutual funds held for over 1 year can offer significantly better post-tax returns compared to FD interest income.
Each SWP withdrawal is treated as a redemption of mutual fund units. The taxation depends on the type of fund and holding period:
The key advantage is that only the gains portion of each withdrawal is taxed, not the entire withdrawal amount. This makes SWP more tax-efficient than FD interest for many investors.