Aditya Birla Sun Life AMC Limited

How can Mutual Funds help generate a side income?

Nov 04, 2019
4 mins | Views 7629

Mutual Funds have gained massive popularity as an investment avenue in the last couple of years. However, there are many aspects about this investment option which are not known to many. While Systematic Investment Plan or SIPs have become the go-to option for most investors, not many people are aware about the merits of SWP or Systematic Withdrawal Plan.

What is Systematic Withdrawal Plan?

This is a great way to structure one’s income and generate a steady cash inflow. With this facility, an investor can withdraw either a fixed sum or appreciation amount from their investment at pre-determined intervals. The frequency of withdrawal can be annual, half-yearly, quarterly or even monthly, basis the investor’s needs and convenience. Investors also have the flexibility to customize their redemptions – they can choose to withdraw a fixed amount or only the capital gains earned on the investment.


  • This plan allows the investors to save, remain invested and take out a certain portion of the accumulated corpus.

  • It is one of the ways to create a second source of income through investments in Equity or Debt- oriented schemes.

  • SWP could be more tax friendly as compared to other regular income options such as dividend since SWP withdrawals are taxed as capital gains. The tax on an SWP is dependent on two factors – the duration of the holding period and the type of fund one is redeeming from. The rates of capital gains tax range from 10-30% depending on whether it is Long Term Capital Gain or Short Term Capital Gain and a debt-oriented or equity-oriented fund.

How can you use SWP in Mutual Funds to give you side income?

  • Temporary stop in earnings

    Systematic Withdrawal Plans can become the source of income if there is a temporary halt in your regular earnings. Individuals who want to turn entrepreneurs or venture into self-employment can use this facility to receive steady income during the gestation period of their projects. Salaried individuals can also benefit from SWPs in case of a job change or unemployment.

  • Fund your monthly expenses

    A SWP can help bring discipline to money management. Many people use this facility to finance their monthly expenses and not go overboard. It can also be used to clear any dues or monthly installments such as loans, rents, etc.

  • Finance your retired life

    While planning for your life post retirement, one of the biggest concerns is a regular income. Especially for those individuals who do not have a pension provision from their jobs. A Systematic Withdrawal Plan from your mutual fund investments can aim to take care of this issue.


Systematic Withdrawal Plans can be one of the options to generate some side income. And who does not need some extra money in your pocket?

“Mutual Funds sahi hain” – Not just for long-term earnings but also to supplement your regular earnings.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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