SWP

A Systematic Withdrawal Plan (SWP) is a facility that allows investors to withdraw a fixed amount of money from their mutual fund investment at regular intervals, such as monthly, quarterly, or annually.

·   SWP is primarily used by individuals who want a steady income stream while keeping their remaining investments working for them.

·   In an SWP, the investor instructs the fund provider to redeem a specified amount or number of units from their mutual fund holdings on a set schedule; this amount is credited to their bank account.

·   The rest of the mutual fund investment continues to earn returns according to market performance, which means the investment may grow or shrink over time depending on withdrawal rates and fund returns.

·   SWP offers flexibility, investors can customize the withdrawal amount and frequency, and most plans allow changes or stoppage at any time.

·  This facility is especially beneficial for retirees or anyone seeking regular cash flow for expenses.

Example:

If you have invested 10 lakhs Rupee in a mutual fund, you can set up an SWP to withdraw 5,000 Rupee per month. The fund will sell as many units as needed (based on the current NAV) to provide 5,000 Rupee every month, continuing until you stop or until the corpus runs out.

Key Points:

·  SWP is available for most mutual funds, subject to provider rules.

·  Withdrawals are subject to capital gains tax, calculated only on gains within each withdrawal.

·  There is usually no TDS (Tax Deducted at Source) for resident investors.

SWP is thus a well-accepted method for ensuring regular withdrawals from your mutual fund investments in a systematic and controlled manner.