An SWP, or systematic withdrawal plan, redeems a fixed amount from a fund at regular intervals and pays it to your bank account.
A systematic withdrawal plan sells enough units of a fund on set dates to pay you a fixed amount. It turns a lump sum into a regular income while the rest stays invested.
For example, you hold ₹20 lakh in a fund and set an SWP of ₹12,000 a month, about 7.2% of the starting value a year. Each month the fund sells units worth ₹12,000 at that day's NAV. If the fund earns more than you withdraw, the balance grows; if it earns less, the balance shrinks and can run out.
Each withdrawal is a sale, so tax applies only to the gain in the units sold, at the rate for short-term or long-term gains. When the units were bought recently, most of each withdrawal is your own capital coming back, and the taxable part is small.
Compared with the IDCW option:
An exit load can apply to withdrawals from recent units. STP and SWP explains how to start one.
A systematic transfer plan moves a fixed amount between two funds of one fund house. A systematic withdrawal plan pays a fixed amount to your bank. How each works and is taxed.
Sell units by number or by amount on the fund house's website or app, MF Central or the registrar. Cut-off times, when the money arrives, exit load and tax.
Each fund page has its returns, risk, costs, managers and everything it holds.