💰 Tax Savings · Income-head reliefs
Systematic Withdrawal Plan (SWP) — tax-efficient income
✍️ EaseValue Advisors · Updated 18 Jul 2026 · FY 2025-26
In short
A Systematic Withdrawal Plan (SWP) from a mutual fund gives you a regular income where only the capital-gains portion of each withdrawal is taxed — far more efficient than fully-taxed interest.
Why it's efficient
- Each withdrawal is part principal + part gain; you're taxed only on the gain, not the whole payout.
- On equity funds, long-term gains enjoy the ₹1.25 lakh annual exemption and then 12.5%.
- Compare a ₹1,00,000 FD payout (fully taxed) with a ₹1,00,000 SWP where maybe ₹15,000 is gain (only that is taxed).
Who it helps
Retirees and anyone wanting a monthly income stream with minimal tax — a smarter alternative to interest-bearing options.
Setting it up well
- Withdraw from older units first so more of each payout is long-term (lower-taxed) gain.
- Keep annual equity LTCG within the ₹1.25 lakh exemption where possible.
- Far more tax-efficient than a fully-taxed FD or annuity for a monthly income.
The law behind it
Section 198 (old 112A) Section 197 (old 112)
General information for FY 2025-26 (AY 2026-27), not advice on your specific case. Limits, rates and conditions
change with each Finance Act and depend on your facts — confirm before acting. © EaseValue Advisors LLP.
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