What is SWP?
The Systematic Withdrawal Plan or SWP offers investors a regular income and returns money that is left
in the scheme. You may withdraw a fixed or a variable amount on a pre-decided date every month, quarter,
or year. You may customise cash flows to withdraw, either a fixed amount or the capital gains on the
investment.
For example, you have 8,000 units in a mutual fund scheme. You have specified a set of instructions to
the mutual fund house where you seek to withdraw Rs 5,000 every month through the Systematic Withdrawal
Plan. On January 01, 2020, the NAV of the scheme was Rs 10. You would get an equivalent number of mutual
fund units = Rs 5,000/10 = 500 units.
The mutual fund house would redeem 500 units and give you an amount of Rs 5,000. You still have 7,500
units left in the mutual fund scheme. Now on February 01, 2020, the NAV of the mutual fund scheme
increased to Rs 15. The equivalent units of the mutual fund scheme are Rs 5,000/ Rs 15 = 333 units.
The mutual fund house would redeem 333 units and give you Rs 5,000 for the month of February. You are
left with 7500 units – 333 units or 7167 units. You may continue the calculations in a similar manner
for the following months.
What is the SWP Calculator?
The SWP Calculator is a simulation that shows you the monthly withdrawals from your mutual fund
investments. It shows the total value of the mutual fund investment after the withdrawal. You may be
able to get a regular income in retirement through the systematic withdrawal plan.
The SWP Calculator consists of a formula box, where you enter the total investment amount, withdrawal
per month, the expected annual rate of return, and the tenure of the investment. The SWP Calculator
shows you the future value of your mutual fund investments.
How does SWP Calculators work?
The SWP Calculator shows you the regular cash flows through the systematic withdrawal plan.
You must use the mathematical formula:
A = PMT ((1+r/n)^nt – 1) / (r/n))
A = Future Value of the Investment
PMT = Payment amount for each period
n = number of compounds in a period
t = number of periods the money is invested
For example, you have an initial investment of Rs 1,20,000 in a mutual fund scheme. You redeem an SWP
amount of Rs 10,000 per month. You have a withdrawal tenure of 12 months. Expected annual return is 7%.
MonthBalance at the beginning of the month (Rs)Redemption Amount (Rs)Interest (Rs)Balance at the end of
the month (Rs
| 1 |
120000 |
10000 |
641.6666667 |
110641.6667 |
| 2 |
110641.6667 |
10000 |
587.0763889 |
101228.7431 |
| 3 |
101228.7431 |
10000 |
532.1676678 |
91760.91072 |
| 4 |
91760.91072 |
10000 |
476.9386459 |
82237.84937 |
| 5 |
82237.84937 |
10000 |
421.3874547 |
72659.23682 |
| 6 |
72659.23682 |
10000 |
365.5122148 |
63024.74904 |
| 7 |
63024.74904 |
10000 |
309.3110361 |
53334.06007 |
| 8 |
53334.06007 |
10000 |
252.7820171 |
43586.84209 |
| 9 |
43586.84209 |
10000 |
195.9232455 |
33782.76534 |
| 10 |
33782.76534 |
10000 |
138.7327978 |
23921.49814 |
| 11 |
23921.49814 |
10000 |
81.20873912 |
14002.70687 |
| 12 |
14002.70687 |
10000 |
23.34912343 |
4026.055998 |
You have a future value of Rs 4,026 as shown in the table.
How to use the ClearTax SWP Calculator?
The ClearTax SWP Calculator helps you to calculate the SWP mutual fund investment over a tenure. To
use the ClearTax SWP Calculator:
- You must fill in the total investment amount in mutual funds.
- Enter the withdrawal per month from the mutual fund scheme
- You must fill in the expected rate of return.
- You then enter the tenure of the investment in years.
- The ClearTax SWP Calculator will show you the total investment, total withdrawal, total
interest earned, and the final value of the investment.
Benefits of ClearTax SWP Calculator
- You may use the ClearTax SWP Calculator to calculate the monthly income from mutual fund
investments, through the Systematic Withdrawal Plan.
- You can try the ClearTax SWP Calculator for different withdrawal amounts and calculate the
maturity amount.
- The calculator helps you identify the best monthly withdrawals from the mutual fund scheme.
- The ClearTax SWP Calculator helps you determine the SWP surplus, which you may invest in
other financial instruments.
FAQs of ClearTax SWP Calculator
-
How does the ClearTax SWP Calculator help you?
The ClearTax SWP Calculator shows you the monthly
withdrawals from the SWP. You can calculate the regular income you want every
month. Any surplus amounts may be invested depending on your financial goals and
risk tolerance. It also shows you the final value of your investment. You may
use the ClearTax SWP Calculator, to calculate the amount you can withdraw from
mutual funds and generate a second income.
-
Is the ClearTax SWP Calculator easy to use?
Yes, the ClearTax SWP Calculator is a handy easy-to-use
utility tool. You can calculate the amount you want to withdraw every month from
the mutual fund scheme. It may be used from the comfort of your home or
anywhere.
-
How does the ClearTax SWP Calculator help you to save
taxes?
The SWP is a tax-efficient tool for retirees to earn a
regular income. It may also be used for multiple purposes such as children’s
higher education or a foreign vacation. The ClearTax SWP Calculator helps you to
enjoy the tax benefit on long-term capital gains above Rs 1 lakh in a financial
year, for equity-oriented funds.
