What Is SWP (Systematic Withdrawal Plan)?
How an SWP pays you a monthly income from a mutual fund, how much you can safely withdraw, tested on the Nifty since 1999, and how every fund category fared under a 6% SWP over 10 years.
An SWP (systematic withdrawal plan) pays you a fixed amount every month by selling some of your mutual fund units. Withdrawing 6% a year from the Nifty 50 (with dividends), ₹1 crore lasted every 20-year period since Jul 1999 and was still worth at least ₹1 crore after 10 years in 99% of start months. Returns are history, not a promise.
A systematic withdrawal plan (SWP) is the reverse of a SIP. You invest a lump sum in a mutual fund, and the fund house sells a few units every month and pays a fixed amount into your bank account. The rest stays invested and keeps earning, so the money can last much longer than a deposit drawn down at the same rate.
The question that matters is how much you can withdraw without running out. Below we answer it with the market's own history, not an assumed return.
How an SWP works
You choose the fund, the amount and the date. Each month the fund house redeems just enough units at that day's NAV to pay you. When the market is up, fewer units are sold; when it is down, more. If the fund's return is higher than your withdrawal rate, the balance keeps growing even as you draw from it.
SWP vs SIP: a SIP puts a fixed amount in every month; an SWP takes a fixed amount out. SWP vs dividend (IDCW): an IDCW payout is decided by the fund and can stop; an SWP amount is yours to set.
How much can you withdraw? Tested on the Nifty since 1999
| Withdrawal from ₹1 crore | Period | Start months tested | Ran out | Still ₹1 crore+ | Worst value left | Median value left |
|---|---|---|---|---|---|---|
| 4% (₹33,333/month) | 10 years | 208 | 0% | 100% | ₹1.14 crore | ₹2.79 crore |
| 4% (₹33,333/month) | 20 years | 88 | 0% | 100% | ₹4.43 crore | ₹11.80 crore |
| 6% (₹50,000/month) | 10 years | 208 | 0% | 99% | ₹75.57 lakh | ₹2.35 crore |
| 6% (₹50,000/month) | 20 years | 88 | 0% | 100% | ₹3.08 crore | ₹10.05 crore |
| 8% (₹66,667/month) | 10 years | 208 | 0% | 94% | ₹37.15 lakh | ₹1.92 crore |
| 8% (₹66,667/month) | 20 years | 88 | 0% | 100% | ₹1.29 crore | ₹8.24 crore |
| 10% (₹83,333/month) | 10 years | 208 | 0% | 75% | ₹6.38 lakh | ₹1.49 crore |
| 10% (₹83,333/month) | 20 years | 88 | 2% | 91% | ₹31.48 lakh | ₹6.40 crore |
₹1 crore invested in the Nifty 50 Total Return Index at the start of each month, with a fixed amount withdrawn every month. A fixed amount loses buying power to inflation; raise it each year and the safe rate falls. An index fund earns slightly less than the index because of its fee.
Which fund types held up under a 6% SWP (Sep 2016 to Sep 2026)
| Category | Funds | Median value left (of start) | Worst | Best | Kept their starting value |
|---|---|---|---|---|---|
| Small Cap (Equity) | 13 | 321% | 85% | 481% | 92% |
| Mid Cap (Equity) | 16 | 292% | 216% | 395% | 100% |
| Multi Cap (Equity) | 5 | 250% | 240% | 364% | 100% |
| Large & Mid Cap (Equity) | 19 | 248% | 176% | 329% | 100% |
| Sectoral / thematic (Equity) | 67 | 246% | 128% | 432% | 100% |
| FoF Domestic (Fund of funds) | 11 | 244% | 140% | 269% | 100% |
| Value (Equity) | 11 | 243% | 157% | 276% | 100% |
| Focused (Equity) | 13 | 226% | 188% | 282% | 100% |
| ELSS (tax saver) (Equity) | 25 | 225% | 161% | 429% | 100% |
| Flexi Cap (Equity) | 18 | 224% | 149% | 401% | 100% |
| Retirement (Solution oriented) | 7 | 213% | 122% | 275% | 100% |
| Large Cap (Equity) | 22 | 195% | 155% | 242% | 100% |
| FoF Overseas (Fund of funds) | 6 | 191% | 121% | 355% | 100% |
| Index funds (equity) | 13 | 188% | 181% | 202% | 100% |
| Aggressive Hybrid (Hybrid) | 20 | 187% | 148% | 295% | 100% |
| Multi Asset Allocation (Hybrid) | 5 | 184% | 168% | 363% | 100% |
| Children's (Solution oriented) | 6 | 170% | 115% | 217% | 100% |
| Balanced Advantage (Hybrid) | 11 | 157% | 112% | 247% | 100% |
| Equity Savings (Hybrid) | 9 | 134% | 85% | 156% | 89% |
| Money Market (Debt) | 7 | 108% | 97% | 110% | 86% |
| Arbitrage (Hybrid) | 12 | 102% | 93% | 105% | 83% |
| Liquid (Debt) | 27 | 99% | 93% | 103% | 19% |
Every direct Growth plan with NAVs for the whole period: ₹1 crore at the start, 6% a year withdrawn monthly. These were good years for Indian shares; a decade that began at a peak, such as January 2008, would show equity categories far lower, as the Nifty table above shows. Funds that closed or merged during the decade are not in AMFI's current list, so the table flatters every category a little (survivorship). Past category results say nothing certain about the next ten years, and equity categories swing far more from year to year than this summary shows.
Tax on SWP
Each withdrawal is a sale of units, so only the gain in the units sold is taxed, not the whole amount. For equity funds held over 12 months, long-term gains above ₹1.25 lakh in a financial year are taxed at 12.5%; within 12 months, 20%. Debt fund gains on units bought from April 2023 are taxed at your slab rate.
Key takeaways
- An SWP sells a few units every month to pay you a fixed amount; the rest stays invested.
- The withdrawal rate matters most: at 6% a year ₹1 crore in the Nifty lasted every 20-year period since 1999.
- Only the gain in each withdrawal is taxed, as capital gains.
Frequently asked questions
What is SWP in mutual funds?
A systematic withdrawal plan: the fund house sells units every month and pays you a fixed amount, while the rest stays invested.
Which SWP is best?
There is no single best fund. Historically, the withdrawal rate mattered more than the fund: at 6% a year, ₹1 crore in the Nifty lasted every 20-year period since 1999; at 10% some ran out. The category table shows how fund types fared under a 6% SWP.
How much can I withdraw through SWP?
Many planners use 4-6% a year of the starting amount for withdrawals meant to last decades. In the Nifty's history since 1999, 6% never ran out over 20 years; 10% sometimes did.
Is SWP taxable?
Only the gain in each redemption is taxed, as capital gains: 12.5% above ₹1.25 lakh a year for equity funds held over 12 months, 20% within 12 months.
What is the difference between SIP and SWP?
A SIP invests a fixed amount every month; an SWP withdraws a fixed amount every month.