Published: 26th Nov 2024
By: Value Research
SWP or systematic withdrawal plan lets you withdraw a fixed amount regularly from your mutual fund investment. Think of it as a reverse SIP–instead of investing regularly, you withdraw regularly.
Let’s say you have Rs 1 crore invested in a mutual fund and need Rs 50,000 monthly for your living expenses. All you need to do is instruct the fund house to redeem units worth Rs 50,000 on a fixed date. The money is then automatically transferred to your bank account.
A systematic withdrawal plan provides a steady cash flow while allowing the rest of your investment to grow. It’s an excellent option for retirees seeking regular income or individuals who want predictable withdrawals.
Any withdrawals, whether SWP or lump sum, are subject to taxation. However, only realised gains are taxed and not the complete withdrawal amount. Tax treatment depends on the fund type (equity or non-equity) and follows the standard tax rules applicable to those categories.
Plan a perfect retirement by understanding how to withdraw optimally from your corpus and enjoy a steady income during your golden years. Click the link below to explore strategies to create a sustainable retirement income through SWP.
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