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Investing

SWP in Mutual Funds: How a Systematic Withdrawal Plan Works

An SWP sells enough mutual fund units on a fixed date to pay you a set amount. Each payout is a redemption, so exit load and capital gains tax apply.

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Written by Aarav Sharma

Updated on 26 September 2026·6 min read

On this page9 sections
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A systematic withdrawal plan (SWP) pays you a fixed amount from your mutual fund on a set date each month or quarter. The fund house sells just enough units to make each payment. Every payout counts as a redemption, so any exit load applies and you pay capital gains tax only on the profit in the units sold.

Key facts

Item Detail
What it does Sells units at regular intervals to pay a fixed sum, through one standing request
Frequency Set by each scheme, commonly monthly or quarterly
Exit load Applies to units sold within the scheme’s exit-load period
Tax on equity funds (tax year 2026-27) 20% on gains from units held 12 months or less; 12.5% on long-term gains above ₹1.25 lakh a year
Tax on specified (debt) funds bought on or after 1 April 2023 Slab rate, whatever the holding period
TDS for resident investors None on capital gains; TDS applies to IDCW above ₹10,000 a year

How an SWP works, unit by unit

Your SWP amount stays fixed, but the number of units sold changes with the NAV on each withdrawal date. When the NAV is high, fewer units are sold. When it falls, more units go.

DSP Mutual Fund gives this example. You invest ₹50 lakh at an NAV of ₹100 and get 50,000 units. Later you withdraw ₹26,000 a month when the NAV is ₹130. Each withdrawal sells 200 units. Those units cost you ₹20,000, so only ₹6,000 of the ₹26,000 is a capital gain.

Units are redeemed first in, first out (FIFO). Your oldest units go first, which matters for tax, as explained below. The remaining units stay invested and keep earning or losing with the market. If withdrawals run ahead of the fund’s returns, the balance shrinks and can run out.

Setting up an SWP: amount, frequency and date

Each scheme sets its own SWP terms in its Scheme Information Document (SID). For example, the SID of the Groww Nifty Non-Cyclical Consumer Index Fund (March 2026) sets:

  • Monthly or quarterly withdrawals.
  • A minimum instalment of ₹500.
  • At least 12 monthly or 4 quarterly instalments.
  • A withdrawal date of the 15th, or the next business day if that is a holiday.
  • At least 7 calendar days to register.
  • If you leave options blank: monthly withdrawals on the 15th for 5 years.

Other schemes set different minimums and dates, so check the SID or the fund house’s website before you apply.

  1. Choose the scheme and the folio you want to draw from. The units must be free of any lock-in.
  2. Log in to the fund house’s website or app, your distributor’s platform, or the registrar’s service, and pick the SWP option. You can also submit a paper form at an official point of acceptance.
  3. Enter the amount, frequency, start date, end date or number of instalments, and the bank account for payouts.
  4. Submit the request and keep the confirmation.
  5. Check the first payout in your bank account and the redemption in your account statement.

Exit load on SWP payouts

An SWP instalment is a redemption, so the scheme’s exit load applies to any units sold within the load period. The load is deducted from the NAV at which your units are sold.

Load structures differ by scheme. The Groww index fund above charges 1% on units redeemed within 30 days of allotment and nothing after that. For systematic transactions, it applies the load that was in force on the date you registered. Many investors start an SWP only after the load period ends. Your scheme’s current load is in its SID and factsheet.

How each withdrawal is taxed

Tax falls only on the gain in the units sold, not on the whole payout. For tax year 2026-27, the rates under the Income-tax Act, 2025 are:

Fund type Units held 12 months or less Units held more than 12 months
Equity-oriented (at least 65% in listed domestic equity) 20% (Section 196; old Section 111A) 12.5% on gains above ₹1.25 lakh a year (Section 198; old Section 112A)
Specified mutual fund, bought on or after 1 April 2023 Slab rate Slab rate

From FY 2025-26, a “specified mutual fund” means one that invests more than 65% in debt and money market instruments, or a fund that puts 65% or more into such funds. Other non-equity funds have their own holding periods and rates; our page on mutual fund taxation covers each type. Surcharge and 4% cess apply on top of these rates.

The 20% and 12.5% rates, and the ₹1.25 lakh exemption, took effect for transfers on or after 23 July 2024. The Income-tax Act, 2025 kept them from 1 April 2026.

FIFO shapes your tax bill. Early instalments usually sell older, long-term units, so gains within ₹1.25 lakh a year can be tax-free in an equity fund. As old units run out, newer units may be short-term and taxed at 20%. Resident investors have no TDS on SWP payouts. They report the gains in their return using the capital gains statement from the fund house or registrar. For NRIs, tax is deducted when the units are redeemed.

You can estimate the tax with the capital gains calculator. Our page on LTCG on shares and mutual funds explains the ₹1.25 lakh exemption in more detail.

SWP vs IDCW payout

The IDCW (income distribution cum capital withdrawal) option was called the dividend option until SEBI renamed it from 1 April 2021. An IDCW payout can include part of your own capital, and the NAV drops by the amount paid.

Point SWP (growth option) IDCW payout
Who decides the amount and date You The fund house, when it declares a payout
What is taxed Only the gain in the units sold, at capital gains rates The whole payout, at your slab rate
TDS for residents None 10% once IDCW from a fund house crosses ₹10,000 in a year

For someone in a higher tax slab, an SWP from the growth option usually leaves more money after tax. An IDCW payout is not guaranteed in amount or timing.

Stopping or changing an SWP

You can change the amount or frequency, or stop the SWP, by sending a request through the same channels. The Groww index fund’s SID asks for 8 calendar days’ notice before the next withdrawal date, and the new amount cannot fall below the minimum. Other schemes may set different notice periods.

An SWP also ends automatically if all units are sold or pledged, or when the fund house is told that the unitholder has died. If your balance falls to zero, the plan stops even if instalments were still scheduled.

To plan how long a corpus might last alongside other income, see our retirement planning guide.

Frequently asked questions

What is SWP in mutual funds?

A standing instruction to sell units at regular intervals and pay you a fixed amount. The rest of your investment stays in the fund.

Is SWP income taxable?

Only the capital gain in each withdrawal is taxed. The part that returns your original cost is not.

Is there TDS on SWP?

Not for resident investors. NRIs have tax deducted on the gains when units are redeemed.

Does exit load apply to SWP?

Yes, for units sold within the scheme’s exit-load period. The load is set in each scheme’s SID.

What is the minimum amount for an SWP?

It varies by scheme. One index fund’s SID sets ₹500 a month or quarter, but check your own scheme’s terms.

Can an SWP run out of money?

Yes. If your withdrawals are larger than the fund’s returns, the balance falls. The plan stops once all units are sold.

Is SWP better than IDCW?

With an SWP you choose the amount and pay tax only on gains. IDCW is taxed in full at your slab rate, and the fund house decides when and how much to pay.

Sources

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