At present time one investment term is very much popular to investor. The term is SWP. SWP stands for Systematic Withdrawal Plan. Systematic Withdrawal Plan is an investment strategy where one regularly withdraws a fixed amount of money from his/her mutual fund holdings. This investment tool is very much useful for maintaining regular cash flow. Suppose you have invested 2 lakh in an equity mutual fund scheme and opt to withdraw Rs. 1000 per month. SWP ensure you get 1000 per month and the balance amount in the scheme keeps growing in line with the market. Many retired individuals and senior citizens use this method to meet monthly expenses.
From the taxation point of view, SWP is very much tax efficient. Regular payout under SWP is basically redemption of units from the scheme. Hence tax treatment of withdrawal will be depending on the scheme from where payout has been taken. If redemption will be taken from equity oriented schemes then in that case equity taxation will be applicable. Generally investor started SWP from equity oriented or hybrid oriented mutual fund.
One more reason to become so popular investment strategy is that it is very much user friendly such as the date and amount of withdrawal decided by the investor and moreover investor can start, stop and modify it any time.
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