SWP (Systematic Withdrawal Plan) is a facility for regular cash flow.
It gives you the freedom to enjoy the life you have always wanted after retirement. You can withdraw money from your existing mutual fund investments at pre-determined intervals, be it weekly, monthly, quarterly, half-yearly or even annually, to create a regular cash flow for your needs. You can also plan your investments and withdrawals in a tax-efficient way. Thus, giving you the potential to earn more returns over a period, as you withdraw happiness bit by bit.

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WITHDRAW HAPPINESS THAT’S TAX EFFICIENT
HOW DOES SWP WORK IN YOUR INVESTMENT IN AN EQUITY Mutual Fund (GROWTH OPTION)
Date of
your SWP		 A
NAV
B
Invested / (SWP)
Amount 		C
Units withdrawn
through SWP B/A		 D
Balance units		 E
Cost of
investment

C* 10.5607		 F
Profit

SWP amount
(30,000) - E		 G
Tax on profit
F *15.45% STCG
(for withdrawals
within 1 year)		 H
Net Profit
F - G		 Value
Balance Units
D*A
1-May-16 10.5607 50,00,000 4,73,453 4,73,453
1-Jun-16 10.7545 -30,000 -2,790 4,70,663 29,464 536 83 453 50,61,745
1-Jul-16 10.8739 -30,000 -2,759 4,67,904 29,137 863 133 730 50,87,941
1-Aug-16 11.1667 -30,000 -2,687 4,65,217 28,377 1,623 251 1,373 51,94,939
1-Sep-16 11.2436 -30,000 -2,668 4,62,549 28,176 1,824 282 1,542 52,00,716
1-Oct-16 11.3277 -30,000 -2,648 4,59,901 27,965 2,035 314 1,721 52,09,621
1-Nov-16 11.3389 -30,000 -2,646 4,57,255 27,944 2,056 318 1,739 51,84,769
1-Dec-16 11.0131 -30,000 -2,724 4,54,531 28,767 1,233 190 1,042 50,05,795
1-Jan-17 10.9784 -30,000 -2,733 4,51,798 28,862 1,138 176 962 49,60,019
1-Feb-17 11.3074 -30,000 -2,653 4,49,145 28,018 1,982 306 1,676 50,78,662
1-Mar-17 11.4033 -30,000 -2,631 4,46,514 27,785 2,215 342 1,873 50,91,733
1-Apr-17 11.5661 -30,000 -2,594 4,43,920 27,394 2,606 403 2,203 51,34,423
1-May-17 11.6562 -30,000 -2,574 4,41,346 27,183 2,817 435 2,382 51,44,417
1-Jun-17 11.8627 52,35,555
BENEFIT OF USING SWP FOR WITHDRAWALS
Particulars Invested Amount SWP Amount
withdrawn in 1 year 		Principal Component
in the withdrawals 		Growth/Gains
over principal
amount 		Tax 15.45% STCG (for withdrawals within 1 year)
 Tax as % of SWP amount withdrawnduring the year J Balance units at end of the year Value ofInvestments
J* Current NAV
Amount 50,00,000 3,60,000 3,39,072 20,928 3,233 0.90% 4,41,346 52,35,555
TAX PAID THROUGH TRADITIONAL SAVINGS INSTRUMENT
Particulars Invested Amount Interest (%) Interest Tax as % on Gains Tax
Amount 50,00,000 7.2 3,60,000 30.90% 1,11,240
As you can see, withdrawals through SWP are tax-efficient as you only pay 3,233 as tax on your gains, i.e. 0.90% on withdrawals of 3.6 lakhs, as compared to a traditional savings instrument where you pay 1,11,240 on your gains.
Source: Internal data compilation. Note: The above examples including the taxation illustration for traditional investment are given for general information only. Units and numbers in the above calculations have been rounded off. Investments made in equity mutual fund schemes carry high risk and there is no assurance or guarantee that the objective of the schemes will be achieved. The above illustration should not be considered as any guarantee of returns to the investors / who are opting for SWP. In view of the individual circumstances and risk profile, each investor is advised to consult their investment/tax advisor(s) before making a decision to invest. Valuation date – June 1, 2017. The date of enrolment for SWP has been assumed as 1st of every month. If such date is a non-business day, then the SWP is processed on next business day. In the above calculations, it has been assumed that investor falls under highest tax bracket (i.e. 30%) and total income of the investor does not exceed Rs. 1 crore. Gains on the redemption of units of mutual fund are treated as capital gains for income tax purpose. For equity-oriented schemes, gains on the investment for <=1 year are treated as Short-Term Capital Gains (STCG) and taxed at 15% while gains on investment greater than 1 year are treated as Long-Term Capital Gains (LTCG) and are exempt as per current tax regulations. Calculations of tax include the amount of tax plus surcharge. At the time of the redemption of units, redemption amount comprises two parts. One is the invested amount and the other is gains on the invested amount. STCG/LTCG tax is applicable only on the gains made on the redemption units. In case of Systematic Withdrawal Plan (SWP), at the time of redemption of each instalment, investor needs to pay STCG/LTCG tax only on the gains part and not on the invested amount. Over a period of time with market appreciation, in each SWP instalment, invested amount (principal) component decreases and growth/gains part increases. Thus it helps the investor over a period of time to consume less principal amount and thereby allowing the balance principal amount to grow further.
Mutual Fund investments are subject to market risk, read all scheme related document carefully.
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