SWP

SWP stands for Systematic Withdrawal Plan. Instead of putting money in each month like an SIP, it takes money out: the fund sells just enough units to pay you a fixed sum on a set date, while the rest stays invested.

How it works

You tell the fund an amount and a date, say ₹20,000 on the 1st of each month. On that day it redeems exactly enough units to pay you ₹20,000 and credits it to your bank, leaving everything else invested to keep growing. It is the mirror image of an SIP: regular, automatic and hands-off, but flowing out instead of in. You can start, stop or change it whenever you like.

What it is used for

The classic use is retirement: you turn a lump sum, perhaps your EPF or accumulated investments, into a steady monthly income without pulling it all out at once, so the remaining balance can still earn returns. It also gives more control than a fund’s payout (IDCW) option, because you decide the amount and timing.

The tax and the catch

Each withdrawal is a redemption of units, so it can trigger capital gains tax depending on the fund type and holding period; rates change at Budget time. And because units are sold at the day’s NAV, drawing a fixed amount while the market is down sells more units, so too high a withdrawal rate can deplete the corpus faster than expected. Size it sensibly, and try the SWP calculator.