Articles / SWP for Senior Citizens

SWP for Senior Citizens: Generate Tax-Efficient Monthly Income from Mutual Funds

Use a Systematic Withdrawal Plan to convert your mutual fund corpus into predictable cash flow, while keeping money invested for growth. Designed for senior citizens who want flexibility, lower tax impact than FDs, and control over withdrawals.

Calculate Your SWP Talk to a Mutual Fund Specialist

Monthly cash flow from your corpus

Capital gains taxation, not full withdrawal

Pause, reduce, or increase anytime

Why SWP Works Well for Senior Citizens

Predictable cash flow directly to your bank every month.

Only the capital gain portion is taxed—often lower than full FD interest taxation.

Can pause, reduce, or increase the payout; corpus stays accessible.

Potential to keep corpus growing with balanced allocation to beat inflation.

How SWP Delivers Monthly Income

Invest

Place a lump sum in suitable debt + hybrid funds.

Set SWP

Choose monthly amount/date; units redeem automatically.

Taxed on Gains

Only the gain portion of redeemed units is taxed.

Review Annually

Rebalance and adjust payout to keep corpus healthy.

Tax Efficiency for Seniors

SWP withdrawals are treated as redemption of units. Only the gain portion is taxed, which is usually lower than being taxed on the full payout like FDs.

Fund Type	Holding Period	Tax	Notes
Equity / Balanced Advantage	≥ 1 year	10% LTCG over ₹1L	Gains under ₹1L/year exempt; no TDS typically.
Debt / Conservative Hybrid	≥ 3 years	20% with indexation	Indexation lowers taxable gains.
Any fund, short term	Short-term	Slab rate (STCG)	Keep a 1–3 year holding window for better tax treatment.

Tip: Spread withdrawals to use the ₹1L annual LTCG exemption on equity-oriented funds; keep 6–12 months of payouts in low-duration debt for stability.

Suggested Allocation & Safeguards

Balanced approach for seniors targeting predictable income with controlled risk. Adjust based on risk appetite and existing assets.

Illustrative SWP Mix

Park 6–12 months of payouts in ultra-short/low-duration debt to cover near-term income.

Rebalance annually to maintain the mix; trim equity after strong years.

Keep emergency fund outside SWP to avoid interrupting payouts.

Lower payout (6–7% of corpus) if markets are weak; step-up only after review.

Monthly SWP Amount Guidance

6% Withdrawal

₹50,000/month on ₹1Cr

More sustainable; aligns with moderate 9–10% return assumption.

7% Withdrawal

₹58,000/month on ₹1Cr

Balanced; review yearly and trim during weak markets.

8% Withdrawal

₹66,000/month on ₹1Cr

Aggressive; higher sequence risk, needs stronger equity tilt and reviews.

Start lower; step up only after a review of returns and required cash flow.

Income vs Corpus Over Time

Illustrative comparison of 6% vs 8% withdrawal rates on a ₹1Cr starting corpus, assuming 9.5% blended return and annual review.

Corpus Trajectory

For simplicity, cumulative incomes shown separately in dataset; actual outcomes vary with market cycles and fund selection. Maintain annual reviews.

Simple Process to Start

Assess income need, risk comfort, and existing emergency corpus.

Select 3–5 funds across debt + balanced advantage + equity savings.

Park 6–12 months income in low-duration debt; start SWP next month.

Review yearly—rebalance, refresh withdrawal rate, and tax plan.

FAQs

Can I change or pause the SWP?

Yes. You can modify or pause anytime; payouts stop from the next scheduled date.

What if markets fall sharply?

Reduce payout to 5–6%, rebalance to add debt, and use your 6–12 month buffer to keep income steady.

Is principal guaranteed?

No. SWP is market-linked. Using debt + balanced allocation and reviews helps manage risk.

Is there TDS on SWP?

Typically no TDS on resident SWP redemptions. Tax is paid when you file returns.

Ready to Set Up Your SWP?

Build a tax-efficient monthly income plan with the right mutual fund mix. We help design payouts, review annually, and keep your corpus working.

Calculate Your SWP Talk to a Mutual Fund Specialist

Disclaimer

Illustrations and charts are educational and not guarantees. Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. Returns are market linked; capital is not guaranteed.

HRP Wealth is an AMFI Registered Mutual Fund Distributor (ARN-342284) and not a SEBI-registered investment adviser. We provide distribution and execution support. For personalised advice, please evaluate independently.

Mutual funds are subject to market risks. Read all scheme-related documents carefully.