How to use Systematic Withdrawal Plan for your regular cash flows
This facility is can be used by retirees seeking a steady income, or those looking to supplement their regular income, or investors who wish to gradually redeem their investments to avoid paying higher taxes and allow their investments to compound simultaneously.
Oct 2025
4 mins read
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In our childhood days, we were taught by our elders to save money we received as gift in our piggy banks. Think of this piggy bank as your corpus which you have been saving diligently for your retirement or any other goal. Once this piggy bank is full, you will start to withdraw some amount to fulfil your goals and meet regular expenses.
When it comes to investments, Mutual Funds offer a feature called Systematic Withdrawal Plan (SWP) which gives you the dual advantage of withdrawing (starting from minimum Rs 1,000) at regular intervals (monthly, quarterly, or annually) and let your remaining corpus grow, depending on fund performance and markets.
This facility is can be used by retirees seeking a steady income, or those looking to supplement their regular income, or investors who wish to gradually redeem their investments to avoid paying higher taxes and allow their investments to compound simultaneously.
Impact on your units
Mutual funds honour SWP commitments by redeeming your units. Suppose you withdraw Rs 30,000 and the fund’s latest NAV is Rs 50 per unit, 600 units (30,000/50) will be extinguished to give you this amount.
How much should you withdraw?
With SWP, the remaining corpus continues to compound over time, subject to market and fund performance. Regular withdrawals reduce the capital available for compounding, so careful withdrawal planning is key to maintain growth. Assume you have a corpus of Rs 1 crore and withdraw Rs 60,000 per month and increase withdrawals by 6% annually, your corpus gets depleted after 32 years, assuming your portfolio earns 12% Compound Annual Growth Rate (CAGR).
How are SWPs taxed?
The taxation of SWP instalments depend on the fund you are withdrawing from. For instance, if you are withdrawing from equity funds, capital gains of up to Rs 1.25 lakh for holding period of more than 12 months are tax free. Gains beyond this threshold (1.25 lakh are taxed at 12.50%). If the holding period is less than 12 months, the gains are taxed at 20%. Surcharge and cess applicable on the above rates. Gains from debt funds, irrespective of the holding period, are taxed as the slab rate. (https://incometaxindia.gov.in/)
Summing up, you may consider SWP if you are seeking a steady income stream, especially during retirement or for any other cash flow needs. SWPs can help you manage cash flow needs without having to liquidate your entire investment at once, providing a more predictable and disciplined approach to withdrawals. Since the goals, aspirations and financial situation of each individual is unique, it is best to work with a financial advisor who can offer a bespoke plan for your goals.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 209 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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