STP and SWP: moving money in, and taking an income out
Aeterna Wealth · figures from our fund data, updated 12 Nov 2026
A systematic transfer plan (STP) moves a fixed amount every week or month from one fund (usually liquid or arbitrage) into another (usually equity), so a lump sum goes in gradually. A systematic withdrawal plan (SWP) sells a fixed amount every month and pays it to your bank: a regular income from your investments. Each transfer or withdrawal is a redemption, taxed on its gain.
When to use an STP
- A bonus, inheritance or property sale that you want in equity without investing it all on one day.
- Typical length: 6 to 12 months, weekly or monthly; longer if a fall right after investing would worry you.
- Park the money in a liquid or arbitrage fund first; arbitrage funds are taxed as equity, which helps in higher slabs.
When to use an SWP
- A regular income in retirement, from a corpus held in hybrid or debt funds (and some equity).
- Keep the yearly withdrawal modest relative to the corpus; see our guide to the 4% rule.
- Each withdrawal is part capital and part gain, so only the gain is taxed, which often makes an SWP more tax-efficient than interest income.
Tax and costs
Every STP transfer and SWP withdrawal is a sale: units held under 12 months in equity funds pay 20% on their gain, and exit loads apply to units still inside the load period. Start an SWP from units that are over a year old.
Common questions
Is an STP better than a lump sum?
A lump sum usually ends higher because more money is invested for longer; an STP lowers the regret of investing just before a fall.
How much can I withdraw through an SWP?
Any fixed amount, but if it is more than the corpus earns, the corpus shrinks. See our SWP calculator.
Are STP and SWP free?
The fund houses don't charge for them, but exit loads and tax apply to each transfer or withdrawal.
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General information, not investment or tax advice for your situation. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
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