Lesson 22 of 50 for advisers · SWPs for retired clients · 4 min read · Reviewed 13 Nov 2026
Each SWP payment is a redemption, so only the gain in the units sold is taxed, not the whole payment. For equity-oriented funds, gains on units held over 12 months are taxed at 12.5% above ₹1.25 lakh a year, and 20% within 12 months. There is no TDS on a resident’s capital gains; for NRIs, tax is deducted at source.
Each SWP payment sells units at the day’s NAV, less any exit load. The exit load goes back into the scheme.
Only the gain inside the units sold is taxed. For equity-oriented funds, long-term gains above ₹1.25 lakh a year are taxed at 12.5%, and short-term gains at 20%.
For a resident there is no TDS on these gains; the client pays the tax with the return. For an NRI the fund house deducts tax at source.
The calculator shows how long a corpus lasts at a given withdrawal, return and inflation.
Key idea: Early in an SWP most of each payment is the client’s own money coming back, so the taxable part is small.
Try the calculator and the one-question quiz on this page to check your own numbers.
Yes, if units sold are within the exit load period. Each payment is a redemption.
Section 393 of the Income-tax Act 2025, which carries over sections 194K and 195 of the 1961 Act.
No. It explains how SWPs work. Whether one suits a client depends on their full position.
For learning only, not investment advice. Built in India by a team that tracks its own money on Reva.