How-to SWP tax Schedule CG

How to handle SWP tax in ITR (mutual fund)

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~4 min.

Key facts

SWP treatment	Each installment = capital gain event (deemed redemption)
FIFO basis	Cost basis FIFO of all units in source folio
Tax framework	Per source scheme: equity (LTCG/STCG) or debt (slab post FA 2023)
Schedule CG	Aggregate monthly installments per category

SWP transactions in ITR require reporting each installment as a capital gain. The AMC’s capital gains statement aggregates these per FY, simplifying reporting. SWP’s tax efficiency over IDCW (slab rate vs LTCG 12.5% for equity-mode) is significant for retirees in higher brackets.

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Step-by-step procedure

See the procedure infobox above.

SWP vs IDCW tax efficiency

Example: Retiree wants Rs 60,000/month from MF.

Option A: SWP from equity hybrid fund

Each monthly redemption realises some capital gain (depends on NAV growth).
Annual aggregate gain: Rs 1-2 lakh typical.
Tax: 12.5% above Rs 1.25L LTCG exemption (or 20% if STCG).

Option B: IDCW from same scheme

Annual IDCW distribution from AMC: depends on AMC’s discretion.
Tax: slab rate (post Finance Act 2020).
At 30% slab: 30% on full IDCW.

For LTCG-eligible SWP: tax cost is ~12.5% on excess above Rs 1.25L. For IDCW: 30%+. SWP saves 15-20 percentage points per rupee.

Worked example

Retiree’s SWP from Equity Hybrid Fund, FY 2024-25:

Monthly SWP: Rs 50,000.
Annual SWP: Rs 6,00,000.
Estimated aggregate capital gain (60% gain on 80% old units, 40% on 20% new): ~Rs 2.4 lakh.
Holding period: mostly > 12 months (LTCG).
Tax: 12.5% × (2.4 lakh - 1.25 lakh) = Rs 14,375.

Effective tax rate on Rs 6L SWP: ~2.4%.

Versus IDCW at 30% slab: Rs 1.8 lakh tax. Difference: Rs 1.66 lakh saved with SWP.

FIFO mechanics in SWP

For SIP-funded source scheme with SWP later:

SIP units acquired over years; each has its own cost.
SWP redeems units FIFO (oldest first).
Oldest units typically have lowest cost basis → highest gain.
LTCG-eligible quickly (oldest first).

For 10-year SIP followed by SWP:

First years of SWP: redeem 10-year-old units (lowest cost) = high LTCG.
Later years: redeem 5-year-old units = moderate LTCG.
Final years: redeem recent SIPs = lower LTCG.

Schedule CG entries

For SWP across the FY (Section 112A entry):

Field	Value
ISIN	Source scheme ISIN
Number of units	Total units redeemed in SWP for the FY
Sale consideration	Total SWP value
Cost of acquisition	Aggregate FIFO cost
LTCG	Total LTCG

AMC’s capital gains statement provides these consolidated numbers.

Multi-year SWP

For investors running SWP across multiple FYs:

FY	SWP withdrawn	Cost basis used	LTCG	Tax
Year 1	Rs 6L	Rs 3.5L	Rs 2.5L	~Rs 16k
Year 2	Rs 6.5L	Rs 4L	Rs 2.5L	~Rs 16k
Year 3	Rs 7L	Rs 5L	Rs 2L	~Rs 9k
…	…	…	…	…

Each FY’s gain reported independently in that FY’s ITR.

External references

References

Income Tax Act, 1961, Sections 47, 48, 50AA, 111A, 112A.
AMFI Best Practice Guidelines on SWP.
Finance Act, 2023.

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Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.