SWP Calculator (Systematic Withdrawal Plan) – Monthly Income & Longevity
Compute regular monthly pension cashflows, capital preservation, corpus longevity, and post-Budget 2024 LTCG tax savings over traditional Fixed Deposits with Section 112A ₹1.25 Lakh annual exemption.
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Why SWP Outperforms Bank Fixed Deposits (FDs)
Proportional Principal Redemption
When withdrawing via SWP, each payout consists partly of your original capital (tax-free) and only partly of capital gains. Only the capital gain component is subject to tax under Section 112A at 12.5% after ₹1.25 Lakh exemption.
100% Taxable Interest at Slab Rates
Bank FD interest is 100% taxable as Income from Other Sources at your highest marginal income tax slab (up to 31.2% or 39% with surcharge), with TDS deducted annually even if not withdrawn.
Remaining Corpus Continues Growing
In an SWP with a conservative 8% to 11% CAGR hybrid or equity fund, your remaining balance compounds in the market, often resulting in a larger final estate even after decades of payouts.
Frequently Asked Questions (FAQ)
What is a Systematic Withdrawal Plan (SWP) and how does it generate income?
An SWP is a mutual fund facility allowing investors to redeem a predetermined fixed sum of money on a monthly or quarterly basis from their accumulated corpus. The remaining invested units continue to earn market returns and compound over time.
Why is an SWP much more tax-efficient than a traditional Bank Fixed Deposit (FD)?
In a bank FD, 100% of the interest earned is taxed at your highest personal income tax slab rate (up to 31.2% or 39% with surcharge) and subjected to TDS. In an equity-oriented SWP, each payout consists of a return of original principal (completely tax-free) and capital gains. Only the capital gains exceeding ₹1.25 Lakhs per financial year are taxed at 12.5% under Section 112A.
What is a Safe Withdrawal Rate so that my corpus never depletes?
A withdrawal rate between 4% and 6% of the initial corpus annually (e.g. ₹35,000 to ₹50,000 per month on a ₹1 Crore corpus) in a fund delivering 9% to 12% p.a. returns ensures the corpus not only survives indefinitely but continues growing over 20 to 30 years.