When it comes to generating passive income, especially post-retirement or during financial planning, one common question is: “Can I get a fixed monthly income from my investments?” The answer is a resounding yes – with the help of SWP (Systematic Withdrawal Plan).
In this guide, we’ll walk you through how a lumpsum investment of 20 lakhs can potentially generate a monthly income of 15,000 through an SWP, along with insights into how it works, returns, tax implications, and tips to make the most of it.
📌 What is SWP?
A Systematic Withdrawal Plan (SWP) is a feature offered by mutual funds that allows investors to withdraw a fixed amount at regular intervals – usually monthly. Unlike dividends, where the payout is not guaranteed, SWP gives investors more control over how much they withdraw and when.
It is the reverse of a SIP (Systematic Investment Plan), which involves investing at regular intervals. In SWP, you withdraw from your investment systematically while the remaining corpus continues to grow.
🔍 How SWP Helps Generate Regular Income
Let’s say you invest a lumpsum of 20 lakhs in a balanced or hybrid mutual fund. You can then set up an SWP to withdraw 15,000 every month. While the monthly payout eats into the principal, if the fund earns reasonable returns, your capital lasts longer and may even grow.
📊 Simple Math Behind 20 Lakh Investment for 15,000 Monthly Income
Let’s break this down with a hypothetical yet realistic scenario:
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Investment Amount: 20,00,000
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Monthly Withdrawal via SWP: 15,000
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Annual SWP Income: 15,000 × 12 = 1,80,000
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Expected Annual Return on Fund: 9% (post-expense, conservative estimate)
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Fund Type: Balanced Advantage or Hybrid Equity Fund
Under these conditions, you may sustain this income for over 20 years, possibly longer depending on market performance. The goal here is to strike a balance – withdrawing enough to meet your needs while allowing your remaining investment to grow.
🧾 Why Choose SWP Over Fixed Deposit or Rental Income?
| Feature | SWP | Fixed Deposit | Rental Income |
|---|---|---|---|
| Flexibility | High | Low | Low |
| Returns (Post-Tax) | Moderate to High | Low | Variable |
| Risk | Market-Linked | Low | Market and Maintenance Risks |
| Liquidity | High | Medium | Low |
| Tax Efficiency | Better (capital gains) | Fully Taxable | Depends on slab |
SWP stands out because of tax efficiency, flexibility, and the potential to preserve or grow the corpus while drawing income.
💡 The Role of Return Rate in Income Sustainability
The success of your SWP largely depends on how your fund performs. If your fund earns more than your withdrawal rate, your capital lasts longer and might even grow. Conversely, if the market underperforms for extended periods, your corpus may deplete faster.
Let’s compare two scenarios:
| Fund Return | Duration SWP Can Last (Approx.) |
|---|---|
| 6% | ~15 years |
| 9% | ~22 years |
| 11% | ~25+ years |
Choosing the right fund is key, look for those with a consistent track record and moderate volatility.
🏦 Best Funds for SWP-Based Income
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Hybrid Equity Funds
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Balanced Advantage Funds
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Low Duration Debt Funds (if safety is a higher priority)
While equity-heavy funds offer better long-term returns, retirees or conservative investors may prefer a hybrid or balanced approach to reduce volatility.
💰 Tax Implications of SWP
One of the biggest advantages of SWP is its tax treatment.
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Only the capital gain portion of your withdrawal is taxed.
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Equity-oriented funds:
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LTCG (after 1 year) taxed at 10% above annual exemption of ₹1 lakh.
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STCG (within 1 year) taxed at 15%.
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Debt funds (post-April 2023):
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Entire gains added to your income and taxed as per your slab.
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Unlike fixed deposits, where the entire interest is taxable, SWP can significantly reduce your tax outgo if planned smartly.
🧑💼 Who Should Use SWP for Income?
SWP is ideal for:
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Retirees seeking a monthly pension-like income
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Early retirees or financially independent individuals
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Parents funding children’s education
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Individuals using corpus from inheritance or business exit
If you have a one-time large amount, and want to turn it into a reliable, tax-efficient income source, SWP is one of the best tools in your arsenal.
⚠️ Common Mistakes to Avoid
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Overestimating Returns: Don’t assume 12-15% return year after year. Be conservative.
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Withdrawing Too Much: A high withdrawal rate will exhaust your corpus prematurely.
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Ignoring Inflation: Your monthly 15,000 today may not suffice 10 years later. Adjust periodically.
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Not Reviewing Annually: Rebalance and re-evaluate annually to stay aligned with goals.
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Using High-Risk Funds: Avoid sectoral or thematic funds for SWP. Stick to diversified, low-volatility options.
🧭 Final Thoughts: Can 20 Lakhs Really Deliver 15,000 Monthly?
Yes, it can – provided you choose the right fund, monitor your returns, and follow disciplined withdrawal. A Systematic Withdrawal Plan (SWP) is not just about passive income; it’s about smart financial planning that balances cash flow and capital preservation.
With prudent planning, a 20-lakh one-time investment can provide steady monthly income for decades, even leaving behind a residual corpus.
Frequently Asked Questions (FAQs)
1. What is an SWP in mutual funds?
An SWP (Systematic Withdrawal Plan) is a facility offered by mutual funds that allows investors to withdraw a fixed amount at regular intervals from their investment, while the remaining capital continues to stay invested and grow.
2. Can I earn monthly income from mutual funds using SWP?
Yes, SWPs are specifically designed to provide regular income from your mutual fund corpus. By selecting a monthly payout, you can receive a steady cash flow.
3. Is it possible to get ₹15,000 per month from a ₹20 lakh lumpsum?
Yes, if you invest ₹20 lakh in a mutual fund and opt for an SWP with an expected annual return of around 10–11%, you can potentially withdraw ₹15,000 per month for a long period, though actual performance may vary.
4. How long will my ₹20 lakh last if I withdraw ₹15,000 per month via SWP?
With a return of 10–11% per annum, your investment can potentially last 20+ years. However, this depends on market performance, fund selection, and taxes.
5. Is SWP income taxable?
Yes. SWP withdrawals are partially taxed based on capital gains. The tax treatment depends on the type of mutual fund (equity or debt) and holding period.
6. What are the benefits of using SWP for monthly income?
SWPs offer regular income, capital appreciation, flexibility, and better tax efficiency compared to traditional instruments like fixed deposits or annuities.
7. Which mutual funds are best for SWP income?
Balanced advantage funds, equity savings funds, and conservative hybrid funds are popular for SWP due to their balance of growth and stability.
8. Can I change the withdrawal amount in an SWP?
Yes, most mutual fund houses allow you to increase, decrease, or stop the SWP at any time, offering great flexibility.
9. Is SWP better than fixed deposit for monthly income?
SWPs can offer higher post-tax returns and flexibility compared to fixed deposits, but they come with market risk. FD offers guaranteed returns but lower income.
10. How do I start an SWP from my mutual fund investment?
You can initiate an SWP through your mutual fund’s website or via your financial advisor/distributor. You’ll need to select the amount, frequency, and start date.
⚠️ Disclaimer
Investing in mutual funds is subject to market risks. Past performance is not indicative of future returns. Always consult a certified financial advisor before making any investment decisions. This article is for informational purposes only and does not constitute financial advice.
