Investments
SWP explained: how to plan mutual fund monthly income
An SWP redeems a fixed amount periodically from your mutual fund units while the remaining balance continues to participate in market growth.
Tax efficiency of SWP vs dividends
Mutual fund dividends are taxed at your marginal slab rate. In contrast, an SWP redemption is treated as a sale of units: only the capital gain portion of each redeemed instalment is subject to capital gains tax (LTCG/STCG), while the principal return portion is entirely non-taxable.
Managing sequence of returns risk
If market downturns happen in the early years of an SWP, withdrawing large fixed amounts can deplete units rapidly. Financial planners recommend a sustainable withdrawal rate between 5% and 7% annually, keeping 2 to 3 years of cash needs in lower-volatility debt or arbitrage funds.
Portfolio longevity planning
If the portfolio return rate equals or exceeds the annual withdrawal percentage, the capital balance can sustain itself indefinitely or even grow over decades, providing a resilient post-retirement income stream.
How to check a SIP projection
Multiply the monthly contribution by the number of months to find total invested. Then compare that with the projection. For ₹10,000 a month over 10 years, total invested is ₹12,00,000; at a 12% annual assumption, WealthAura's start-of-month method projects about ₹23.23 lakh. That difference is a projection, not a return you can rely on.
This guide is for general education. Rules, lender terms, bank terms and individual circumstances can change the result.
Use the relevant calculatorFrequently asked questions
Does a SIP projection guarantee a return?
No. It uses the selected constant return assumption; market-linked investments can rise or fall.
Which calculator should I use with this guide?
Use the SIP calculator for a fixed monthly contribution and treat the output as an illustration.