Which is a better option dividend or SWP to get regular returns from debt funds

We have described in detail your query in this article https://www.advisorkhoj.com/company/Principal-Mutual-Fund...

Please note that there is no way that you can get tax free return from debt mutual funds. Please note that in case of SWP from debt funds, all withdrawals within 3 years are subject to short term capital gains taxation (taxed based on the tax bracket you are falling in) and withdrawals beyond 3 years are subject to long term capital gains tax. In case of long term capital gains taxation of debt funds, tax @ 20% is payable after indexation.

Also, AMC pays dividends distribution tax (DDT) @ 28.84% on the dividends paid for debt funds. Therefore, the dividends may be tax free in your hand but the AMC is paying the DDT and therefore it is a cost to you. Please read Mutual Fund Taxation in 2016-17

Therefore, the best way to get tax efficient return from debt funds is SWP option which we have discussed in details in the above blog and also in this blog https://www.advisorkhoj.com/company/Principal-Mutual-Fund... However, there is no way to get tax free returns from debt funds.

Hope the above helps.