A ₹4.5 crore retirement corpus invested in a fixed deposit (FD) at a 7% interest rate earns about ₹37.33 lakh in interest over a year. However, it also pushes income into the 30% tax slab, attracting around ₹7 lakh in taxes under the new tax regime, leaving the retiree with roughly ₹30.33 lakh a year.
But there is a way to get better post-tax returns that also increase each year to keep up with inflation — mutual funds.
According to an Economic Times (ET) report, investing the corpus in a mutual fund and setting up a systematic withdrawal plan (SWP) reduces the tax burden and creates a steady income.
Another plus of this approach is that you can withdraw both the principal and the gains, but you pay income tax only on the gains, not on the principal.
The report noted that long-term capital gains on equities are also exempt up to ₹1.25 lakh in a given year, and gains above it are taxed at a much lower rate of 12.5%.
The higher your investment in equity instruments with a long-term horizon, the lower your tax outgo, ET said. Therefore, tax liability for equity MFs remains much lower compared to FDs if you are investing ₹4.5 crore.
If you hold a ₹4.5 crore corpus and possess the risk appetite for growth assets like equities, setting up a Systematic Withdrawal Plan (SWP) through mutual funds is a highly effective way to generate regular monthly income.
However, rather than parking your entire wealth into a single fund, strategic diversification is critical. A more prudent, risk-adjusted approach involves dividing your corpus across five distinct investment buckets:
While wealth management strategies can vary based on individual financial goals, below is one structured allocation blueprint for effectively distributing a ₹4.5 crore portfolio:
The proposed asset allocation relies on a strategic “bucket” approach, carefully structured to minimise risk while maximising tax efficiency across both short- and long-term horizons.
This method segments your investments into distinct time-based buckets, each designed to generate regular income for specific years. By retaining a substantial portion in equities, the strategy targets significant capital growth over time.
However, financial experts have cautioned that this approach is exclusively suited for investors with a strong risk appetite for equity market volatility.
Here is how the bucket allocation breaks down across different time horizons:
Arshdeep Kaur is a Senior Content Producer at Mint, where she reports and edits across national and international politics, business and culture‑adjacent trending stories for digital audience. With five years in the newsroom, she strives to balance the speed and rigor of fast‑moving news cycles and longer, context‑rich explainers. <br><br> Before joining LiveMint, Arshdeep served as a Senior Sub‑Editor at Business Standard and earlier as a Sub‑Editor at Asian News International (ANI). Her experience spans live news flows, enterprise features, and multi‑platform packaging. <br><br> At Mint, she regularly writes explainers, quick takes, and visuals‑led stories that are optimized for search and social, while maintaining the publication’s standards for accuracy and clarity. She collaborates closely with editors and the audience team to frame angles that resonate with readers in India and abroad, and to translate complex developments into accessible, high‑impact journalism. <br><br> Arshdeep's academic training underpins her interest towards policy and markets. She earned an MA in Economics from Panjab University and holds a Post‑Graduate Diploma in Broadcast Journalism from the India Today Media Institute (ITMI). This blend of economics and broadcast storytelling informs her coverage of public policy, elections, macro themes, and the consumer‑internet zeitgeist. <br><br> Arshdeep is based in New Delhi, where she tracks breaking developments and longer‑horizon storylines that shape public discourse.
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