SWP Calculator: Create Monthly Income from Mutual Funds
Better Than FD Interest: Tax-Efficient Monthly Income
A Systematic Withdrawal Plan (SWP) lets you withdraw a fixed amount monthly from your mutual fund investment. Unlike FD interest (taxed fully at slab rate), SWP withdrawals are a mix of capital and gains — only the gains portion is taxed, and if held over 12 months (equity) or 24 months (debt), you qualify for lower LTCG rates.
How SWP Works
You invest a corpus (say ₹50 lakh) in a fund and set up monthly withdrawals (say ₹30,000). The fund redeems units each month to pay you. If the fund earns more than your withdrawal rate, the corpus grows. If less, it depletes over time.
SWP Sustainability: Withdrawal Rate Matters
| Corpus | Monthly SWP | Annual Withdrawal Rate | Sustainability (at 10% fund return) |
|---|---|---|---|
| ₹50L | ₹30,000 | 7.2% | Corpus depletes in ~25 years |
| ₹50L | ₹25,000 | 6.0% | Corpus lasts 40+ years |
| ₹50L | ₹20,000 | 4.8% | Corpus grows perpetually |
Keep your SWP withdrawal rate below 5–6% of corpus for long-term sustainability. Use the SWP calculator to check how long your corpus will last at different withdrawal amounts. For building the corpus, use the SIP calculator.
SWP vs FD Interest for Retirees
- Tax efficiency: SWP gains taxed at LTCG rates (12.5%); FD interest at slab rate (up to 30%)
- Inflation protection: Equity/hybrid fund corpus can grow, preserving purchasing power; FD principal stays fixed
- Risk: SWP in equity carries market risk; FD is guaranteed
- Best approach: Use FD/debt for 2–3 years of expenses; equity SWP for the rest