can someone explain regarding systemic withdrawal plan? is it a guranteed return ? or is it risky

Ans: Hi Siddhartha, thanks for writing to me.

With a "Systematic Withdrawal Plan", you are instructing the mutual fund company to redeem units of a certain amount at a given frequency (say monthly, quarterly and so on) and deposit the funds to your bank account. This helps you generate regular cash flow and redeem in a planned manner.


A "Systematic Transfer Plan" is when you instruct the mutual fund company to redeem units from one scheme and invest the redemption proceeds amount in another scheme.

Ans: Hello and thanks for writing to me. As you have a corpus of Rs.50 Lakh and would want to get regular incomes from it, you can consider starting SWP's in balanced advantage funds which invest in a mix of debt and equity.

You can invest your corpus equally in:

1-ICICI Prudential Balanced Advantage Fund
2-Aditya Birla Sunlife Balanced Advantage Fund
3-LIC MF Balanced Advantage Fund
4-Tata Balanced Advantage Fund

You can begin SWP's from these schemes as per your needs.

I mention these assuming you are fine with taking some risk. If you mention your risk appetite, I may recommend some other schemes.

Ans: There are some advantages to consider direct funds, and the cost savings can be significant in the long run. However, there are some potential benefits to using a regular MFD:
Advantages of Investing Through a Mutual Fund Distributor (MFD):
• Personalized Advice: MFDs can be helpful for beginners or those who lack investment knowledge. They can assess your risk tolerance, financial goals, and investment horizon to recommend suitable mutual funds. This personalized guidance can be valuable, especially if you're new to investing.
• Convenience: MFDs handle all the paperwork and transactions on your behalf, saving you time and effort. They can help with account setup, SIP registrations, and managing your portfolio across different funds.
• Investor Support: MFDs can be a point of contact for any questions or concerns you may have about your investments. They can provide ongoing support and guidance throughout your investment journey.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Sure. You can reach me through the website link given in the signature below.

You need handholding for:

Creating your customised investment plan

Choosing the right mutual funds

Setting up Systematic Withdrawal Plans (SWP)

Reviewing and rebalancing your portfolio periodically

Ensuring tax efficiency and long-term growth

Look forward to helping you build a stress-free retirement income strategy.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Yes, a Systematic Withdrawal Plan (SWP) can give tax benefits. But only when used carefully. Let us understand this in a simple, step-by-step manner.

What Is SWP?
SWP means taking out money regularly from a mutual fund.

You can choose how much you want every month or quarter.

It continues until your units are fully withdrawn.

You can use SWP to create monthly income, like a pension.

It is flexible. You can increase, reduce, or stop anytime.

Tax Benefit #1: Only Capital Gains Are Taxed
This is the biggest benefit of SWP.

You withdraw money regularly from your mutual fund.

But only the capital gain part is taxed.

The principal or cost is not taxed.

For example:

You invest Rs. 10 lakhs in an equity mutual fund.
After a few months, your fund grows to Rs. 10.5 lakhs.
Now, you withdraw Rs. 1 lakh using SWP.
Here, only the profit inside that Rs. 1 lakh is taxed.
The remaining part, which is your own investment, is not taxed.

So SWP is much better than FD interest. FD interest is fully taxable. But with SWP, only gain is taxed.

Tax Benefit #2: Rs. 1.25 Lakh Long-Term Gain is Tax-Free in Equity Funds
This rule applies from April 2024.

Long-term capital gains (LTCG) from equity mutual funds are tax-free up to Rs. 1.25 lakh every financial year.

This applies when your holding period is more than one year.

If your gains cross this limit, the extra part is taxed at 12.5%.

So, if you plan your SWP carefully and withdraw only a small amount, you may not pay any tax at all. But if the gain crosses Rs. 1.25 lakh, only the extra gain is taxed.

This is a huge advantage. FD, rental, annuity, and interest income have no such free limit.

Tax Benefit #3: No TDS on SWP for Resident Indians
TDS stands for Tax Deducted at Source.

When you take SWP from mutual funds, there is no TDS.

You get the full amount in your bank account.

You are responsible to declare the gains in your income tax return.

This gives you full control of your income. You are not forced to pay advance tax at source.

Tax Benefit #4: You Can Do Tax Harvesting with SWP
This is a smart way to save tax.

Every year, you can redeem mutual fund units.

Keep your capital gains within Rs. 1.25 lakh.

Then reinvest the same money again.

This will reset your cost of investment.

This will reduce your future capital gains.

This is called tax harvesting. It is very useful when your fund is growing fast. It helps in managing tax burden in future years.

You can combine SWP with tax harvesting. This needs annual planning. A Certified Financial Planner (CFP) can help.

Taxation Based on Holding Period and Fund Type
Tax rules depend on:

Fund Type – Equity or Debt

Holding Period – More than one year or less

If it is an equity fund held for more than 1 year:

Long-term capital gain (LTCG) up to Rs. 1.25 lakh is tax-free.

Beyond Rs. 1.25 lakh, gain is taxed at 12.5%.

If it is an equity fund held for less than 1 year:

Gain is called short-term capital gain (STCG).

STCG is taxed at 20%.

If it is a debt fund:

Short-term and long-term both are taxed as per your income tax slab.

There is no indexation now.

That is why equity mutual funds are better for SWP. They offer both growth and tax benefits.

How to Get Full Tax Benefits from SWP
To enjoy all benefits, follow these:

Use equity mutual funds, not debt funds.

Invest with long-term holding mindset.

Start SWP only after one year of investment.

Withdraw small amounts to stay within the tax-free limit.

Don’t redeem big amounts in one go.

Track capital gains every financial year.

Rebalance your investments annually.

Consult a Certified Financial Planner (CFP) for better planning.

This helps you take regular income without losing your principal and without paying high tax.

Direct Plans vs Regular Plans – Tax Impact in SWP
If you are using direct plans:

You don’t have a CFP to guide your withdrawals.

You may miss the Rs. 1.25 lakh tax-free limit.

You may withdraw more and pay extra tax.

No one will review your portfolio every year.

You may not do rebalancing properly.

You may not benefit from tax harvesting.

Instead, invest in regular plans through a CFP-certified MFD. This gives you:

Personalised advice

Regular review

Tax-efficient SWP

Goal-based planning

Peace of mind during market fall

You don’t lose money in fees. You gain more by saving taxes and avoiding mistakes.

Why SWP is Better Than FD Interest
FD interest is taxed fully. SWP only taxes the capital gain.

In FD:

Interest is taxed at your full slab rate.

There is TDS deduction on interest income.

Returns do not beat inflation in long term.

Fixed income is rigid, not flexible.

In SWP:

You can manage tax by controlling capital gains.

You get flexibility in withdrawal.

You can combine it with tax harvesting.

Equity gives inflation protection and long-term growth.

This makes SWP a better income tool than FD or annuity. But only if you use it properly with guidance.

Common Mistakes People Make with SWP
Start SWP from equity funds within 6 months

Use debt funds thinking they are safer

Withdraw more than what fund earns

Cross tax-free gain limit and pay higher tax

Do it without CFP support and regret later

Avoid these mistakes. Don’t look only at income. Look at long-term sustainability too.

SWP in Retirement Plan
If you are 55 or above:

Start SWP from equity mutual funds after 1 year holding

Withdraw Rs. 40,000 to Rs. 1 lakh monthly depending on your corpus

Keep 2–3 years of expenses in safe debt funds

Rebalance once in 2–3 years

Review SWP amount yearly with your CFP

This gives a smooth monthly income. It also grows your capital over time. You don’t need to touch your principal often.

Final Insights
SWP gives income with tax efficiency. It gives flexibility, control, and peace of mind. But don’t treat it like an FD or annuity. SWP needs planning, guidance, and tracking.

Work with a Certified Financial Planner. Use regular mutual funds. Keep your gains under control. Reinvest smartly. Combine tax harvesting with income planning. That is how you create long-lasting wealth with SWP.

Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment