What It Means
An SWP (Systematic Withdrawal Plan) is the mirror image of a SIP: instead of investing a fixed amount at regular intervals, you redeem a fixed amount (or a fixed number of units) from an existing mutual fund investment at regular intervals. It's commonly used by retirees or anyone who wants a predictable, recurring cash flow out of a lump sum investment.
How It Works
Each SWP instalment is a partial redemption, so it sells units at that day's NAV and is taxed like any other mutual fund redemption, as capital gains, based on how long those specific units were held. Because it withdraws a fixed rupee amount rather than a fixed number of units, an SWP sells more units when the NAV is low and fewer when it's high, the opposite pattern from how a SIP buys.