📚 Financial Education Library › Article #16
Published: 2026-06-21 · By Bhanuprakash Sardesai
16. SWP: Systematic Withdrawal Plan for Retirement Income
An SWP is the SIP run in reverse. Instead of feeding money into a fund every month, you withdraw a fixed sum every month from a corpus you've already built. It is the tool most Indian retirees reach for to convert a lumpsum into a predictable monthly income — and the math behind it deserves more attention than it gets.
How does SWP work? Suppose you have ₹50 lakh invested in a balanced advantage fund. You set up a monthly SWP of ₹25,000. Each month, the fund house redeems units worth ₹25,000 from your holdings and transfers the money to your bank account. The remaining units continue to grow with the market.
The key advantage over traditional fixed deposits is that only the withdrawn amount is taxed. In an FD, the entire interest earned is taxed annually at your slab rate. In an SWP from an equity fund, each withdrawal is part return of capital (tax-free) and part capital gains. If held for over 12 months, the gains portion is LTCG, with the first ₹1.25 lakh per year completely tax-free.
SWP is an incredibly powerful tool for retirees. A retiree in the 20% tax bracket can generate monthly income with near-zero tax liability. You can plan your withdrawal strategy using the insights from our free online SIP Calculator and FIRE Number Calculator.
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