| Year | Corpus | Withdrawn | Gain part of draw | Tax that year | Effective (cumulative) |
|---|
Picture a deep well, fed by its own spring. Each morning you lower a small vessel — a lota — and draw a day’s water. Whether the lota holds a little more or less barely matters, because it's never a meaningful fraction of the well. Your corpus is the well. Your withdrawal is the lota. Tax is a toll on the water in the lota, never on the well itself.
Two things shrink the toll. First, you're taxed only on the gain inside a withdrawal, not the whole amount, and equity gain is taxed at just 12.5%, with the first ₹1.25 lakh each year exempt. Second, and this matters more: the draw is a tiny slice of the corpus. Even if every rupee you pulled out were pure gain, a 1.6% draw at 12.5% costs about 0.2% of the well a year. The well doesn't drain because the rate is low and the lota is small. The water isn't untaxed — the toll is just tiny.
Move the “your own money invested” figure and watch the gain part of the draw climb year by year in the table. A corpus you built over fifteen years already carries embedded gains on day one, so your withdrawals are never “all principal.” The protection was never that the money is untaxed. It's that the toll is small against a large, growing well.
Drag the monthly withdrawal up. Somewhere past 4–5% of the corpus a year, the lota stops being a lota and the metaphor breaks: tax, and depletion, start to bite. Below about 2%, tax barely matters. What decides whether tax matters isn't the tax table. It's your withdrawal rate. Everything else is noise around it.
Inheritance isn't tax-free. It's tax-deferred. India has no estate tax today, so the well passes to the next generation without an inheritance levy. But heirs inherit your original cost basis, not a stepped-up one, so the embedded gain travels with the assets and gets taxed whenever they finally sell. And the law itself has changed twice in five years. Building a retirement posture around today’s exact tax table is building on sand.
This tool assumes smooth returns. A calm well is the right picture at a 1.6% draw, where returns comfortably outrun withdrawals. It's the wrong picture if you draw heavily from an all-equity corpus through a crash — there, sequence-of-returns risk does real, permanent damage. For how to structure the drawdown against that, pair this with The Decumulation Architecture.