Systematic

Withdrawal Plan

Smart Investing
Beyond SIP
SMART INVESTING IS ABOUT
Investing
Regularly

Investing for a
determined goal

Investing over a
period of time

HOWEVER, SMART INVESTING ALSO INVOLVES:

Being able to create

systematic payouts

Lowering risks to your

portfolio when goals are near

Making most of the market ups

and downs over a period of time

Being able to book profits

when investments peak

Is smart investing only about investing? It also involves carefully planning

your investments to ensure income, right when it is needed.
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 SYSTEMATIC WITHDRAWAL
PLAN (SWP)

A FACILITY THAT PROVIDES:

Regular cash flow

Profit booking on investments

Tax efficiency in the long term*

* If the investment qualifies as long term capital asset, no long term capital gains in equity funds and indexation benefits for taxation available in debt funds

Availing a facility like SWP optimises your investments and helps in

realising your investment goals.
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 SYSTEMATIC WITHDRAWAL
PLAN (SWP)
A unique facility to create a regular income flow from
your mutual fund investments.

YOU CAN CHOOSE:

THE AMOUNT THE FREQUENCY THE PERIOD

How much you want How frequently you Till which date you want
regularly want this amount to keep receiving such
(Monthly/Quarterly/ cash flows
Half-yearly/Yearly)

TWO OPTIONS:

FIXED WITHDRAWAL CAPITAL APPRECIATION

You get a fixed amount in your You get only the appreciation made on
bank account regularly at the the investment (over a particular
chosen frequency. amount) at the chosen frequency.

SWP is designed to work when one is close to their goals,

specially in case of equity investments.
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 SWP FOR SEEKING
REGULAR CASH FLOW
Mrs Thomas – Invests her retirement funds in
mutual funds and fixed deposits. Due to decline
in the interest rates, her income has reduced and
her expenses have gone up. She wants to use her
mutual fund investments to plug in the gap.

She can set up a monthly SWP for the

amount she requires on a monthly basis.

Few years back Mr and Mrs Bajaj invested lump

sum amount in a mutual fund. Now they want
this corpus to fund their daughter’s day care and
tuition fees.

They can register for a quarterly SWP in

the mutual fund for the amount of daycare
TUITION
FEES and tuition fees payable quarterly.

SWP in a mutual fund can come handy in situations

where a regular cash flow is envisaged.
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 SWP FOR REGULAR
EXPENSES
Dhananjay has received salary arrears. Now he wants to use these funds to
take care of his retired mother’s monthly expenses.

He can invest in a mutual fund and when his mother retires, he can set
up a monthly SWP for the amount that his mother needs.

SWP serves as an excellent tool for funding expenses after retirement.

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 SWP FOR BOOKING PROFITS
ON INVESTMENT
Mr Parkar invested in an equity mutual fund. He is afraid that the gains
made so far may get wiped out if there is a sudden market collapse.

He can register a SWP with appreciation withdrawal option.

Appreciation made over and above a particular threshold on the
SWP will be redeemed on a periodic basis.

As time passes, the NAV increases, the principal component per SWP installment
comes down, thereby retaining a larger portion for future capital appreciation.
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 A TAX EFFICIENT
OPTION - SWP
SWP IN THE FIRST YEAR OF INVESTMENT
Short term capital gains tax at 15%
SWP IN YOUR
only on the gains made.
EQUITY
MUTUAL FUNDS SWP AFTER THE FIRST YEAR OF INVESTMENT
LTCG tax @ 10% only on the gains made, subject to
exemption# of Rs. 1 lakh for the financial year.

SWP IN THE FIRST 3 YEARS OF INVESTMENT

Short term capital gains tax at applicable tax
SWP IN slab of the investor only on the gains made.
DEBT SWP AFTER 3 YEARS OF INVESTMENT
MUTUAL FUNDS
Long term capital gains tax @ 20% only on
the gains made, with indexation benefit.

# Exemption of Rs. 1 lakh includes LTCG on transfer of equity share in a company or a unit of an equity oriented fund or a unit of a business trust.
The same will be taxed without indexation and without foreign currency fluctuation benefit.

A careful understanding of SWP brings out the tax efficiency of the facility.
It is important to see how SWP can be beneficial to a particular investor.
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 TAX IMPACT EXPLAINED
Mr Sharma opts for SWP in the growth option of a equity oriented mutual fund. In SWP, every withdrawal
consists of principal component and gain component. Tax is applicable only on the gain component. Gain
component is smaller as compared to principal component during initial withdrawals. Hence lower tax.
Over time, the principal component of the payout decreases giving way to the gain component.
Let us consider the example below:
Initial Investment: RS. 1,00,000 SWP amount each month: RS. 1000
Total withdrawal over 12 months: RS. 12000 Tax Paid: RS. 305
Taxes paid on gain as percentage of total 30% tax on interest bearing
withdrawal over 12 months : 12.00% Vs
Income traditional investments
Refer the table below for detailed calculations:
Principal Value of Investment

Investors should be aware that the fiscal rules/ tax laws may change and there can be no guarantee that the current tax position may continue
Units Cashflow Gain Component Capital Gains Tax @

The above simulation is for illustration purposes only. HDFC Mutual Fund/AMC is not guaranteeing return on investments made in the scheme.

indefinitely. Short Term Capital Gains (STCG) at the rate of 15% plus applicable surcharge and cess. Investors are advised to consult their tax
Date NAV Number of Units Units Transacted Component in HDFC Prudence
O/s (Rs) (Rs) 17.472% (Rs)
(Rs) Fund (Rs)

01- 01-2017 40.97 - 2,440.82 2,440.82 100,000 100,000 100,000

01- 02-2017 43.71 2,440.82 (22.88) 2,417.94 (1,000) 62.65 937 11 105,683

advisers. As the units redeemed are less than 15% of the units allotted on 01.01.2017, NIL exit load has been considered.
01- 03-2017 44.23 2,417.94 (22.61) 2,395.33 (1,000) 73.74 926 13 105,949
01- 04-2017 45.77 2,395.33 (21.85) 2,373.49 (1,000) 104.88 895 18 108,634
01- 05-2017 46.93 2,373.49 (21.31) 2,352.18 (1,000) 127.04 873 22 110,393

^This is for illustration purpose only, tax as a % of SWAP could be higher in subsequent years.
01- 06-2017 47.66 2,352.18 (20.98) 2,331.20 (1,000) 140.36 860 25 111,103
01- 07-2017 47.41 2,331.20 (21.09) 2,310.11 (1,000) 135.90 864 24 109,530
01- 08-2017 49.63 2,310.11 (20.15) 2,289.96 (1,000) 174.49 826 30 113,650
01- 09-2017 48.76 2,289.96 (20.51) 2,269.45 (1,000) 159.82 840 28 110,665
01- 10-2017 47.78 2,269.45 (20.93) 2,248.52 (1,000) 142.46 858 25 107,425
01- 11-2017 51.90 2,248.52 (19.27) 2,229.25 (1,000) 210.64 789 37 115,704
01- 12-2017 51.22 2,229.25 (19.52) 2,209.73 (1,000) 200.18 800 35 113,191
01- 01-2018 52.27 2,209.73 (19.13) 2,190.60 (1,000) 216.14 784 38 114,495
Total Value Returned Total 305 126,495
Tax To be paid 305
Post Tax Return 126,190
Particulars SWAP Value Principal Taxable Income Tax to be Paid Tax as a % of Units Value of
(Rs) Returned (Rs ) ) (Rs) @ 17.472% (Rs) SWAP (%) Outstanding Investment
Amount 12,000 10,252.00 1,748.00 305 2.55^ 2190.60 114,495.00

SWP works out to be a tax efficient solution to structuring regular payouts.

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 SETTING UP SWP

Get an
SWP form

Download
from Decide the
website/ SWP
get from amount
AMC/
Distributor Choose
the SWP
variant
Choose
that
the SWP
matches
frequency
your Mention
objectives the period

Start date Add bank

and end details
date Sign and
submit

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 Disclaimer
The information provided here is solely for creating awareness and educating investors / potential investors about
Mutual Fund Schemes and for their general understanding and should not be construed as investment advice.
Whilst HDFC Mutual Fund takes reasonable steps to ensure the accuracy of all information, it does not guarantee
the completeness, efficacy, accuracy or timeliness of such information. Readers are advised not to act purely on
the basis of information provided herein but also to seek professional advice from experts before taking any
investment decisions. Neither HDFC Mutual Fund, HDFC Trustee Company Limited, HDFC Asset Management
Company Limited nor any person connected with them accept any liability arising from the use of this information.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS,

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