List of Top Monthly Income Schemes

 Post Office Monthly Income Scheme is suitable for investors who are risk-averse and want a continuous income. The post office monthly income scheme has a deposit period of 5 years and comes with an interest rate of 7.40% from 1st July 2023. This rate is subject to change without prior information. In a Post Office Monthly Income Scheme, you can start with an initial deposit as low as Rs.1500. All Indian Residents are eligible to apply for Post Office Monthly Income Scheme. You can open POMIS account in your child’s name as well provided he/she is 10 years old or more.

Features of Post Office Monthly Income Scheme:

• Low Risk Investment
• Initial Deposit as low as Rs.1500
• Guaranteed Returns
• Reinvestment Facility
• Nomination Facility Available

Banks and financial institutions provide Fixed Deposit with monthly payout option. Such a monthly income scheme allows you to enjoy added flexibility of monthly payout. You may diversify your funds in various banks and high-ranking companies for making the most of your monthly income scheme. Fixed Deposits with monthly payout option is recommended for pensioners or senior citizens as the interest earned monthly can be another source of income for them.

Features of Fixed Deposits:

• Fixed Returns
• Regular payouts
• Low Risk on Investment
• Partial Withdrawal Allowed
• Loan against Fixed Deposits

Also Read: Fixed Deposit for your Child’s Future

Senior Citizen Savings Scheme is for senior citizens of 60 years of age or above. This scheme can help them earn high returns with low risk involved. Senior citizens can invest in this scheme by visiting certified banks and post offices across the country. In this scheme, you can invest the money received as the retirement benefit. The maximum limit of investment under Senior Citizen Savings Scheme is Rs.15 lakh. You can invest Rs.15 lakh or the amount received on your retirement, whichever is lower. Features of Senior Citizen Savings Scheme:

• Invest upto Rs.15 lakh
• Safe Investment Option (Backed by Indian Government)
• Tax benefit under Section 80C
• Nomination Facility Available
• Apply from any authorized bank or post office

A Monthly Income Plan (MIP) is an alternative to Post Office Monthly Income Scheme and fixed deposits with monthly payout option. MIP is a monthly income mutual fund plan where a company provides investors and shareholders with a certain sum of money monthly on the basis of fund’s performance. MIP is debt oriented and generally categorized under the hybrid mutual fund. Unlike other monthly income schemes, this monthly income plan is moderately risk scheme and does not generate a fixed monthly income. Features of Monthly Income Plan (MIP):

• Debt Oriented (Hybrid Mutual Fund)
• Moderate Risk Involved
• Earn Dividends (in case of profits)
• No Entry Load
• No Lock-in Period

Also Read: Types of Investments in India

Fixed deposits offered by many banks provide investors the option to receive monthly interest pay outs. These deposits offer a fixed rate of return that is locked-in at the time of initiating the FD. FDs offered by corporate entities known as corporate fixed deposits also offer the option of monthly pay out however, these investments are considered to be higher risk as compared to bank FDs. FDs with monthly pay outs do not offer any tax benefit to investors under current tax rules. FD with monthly pay outs are currently available for investment tenure of up to 10 years.

Traditionally, banks have been the go to option for Indians seeking to invest in fixed deposits. However, many leading corporation in India also offer fixed deposits for time period ranging from 1 year and up to 5 years or even longer. These fixed deposits offered by corporations are termed as corporate fixed deposits and offer assured returns similar to bank FD. Additionally, corporate FDs are assigned ratings by credit rating agencies such as AAA, AA, etc. that provide insight into the potential risk for the investor. A corporate FD with monthly pay-out option ensures regular income for the investor by paying a specific monthly amount based on the interest rate offered by the FD. As a result of the assured returns, the monthly income offered by a corporate FD is predictable and regular.

Investors who have a substantial corpus invested in mutual funds also have the option of creating a steady flow of monthly income. This is possible through a systematic withdrawal plan or SWP. Typically, a SWP offers a fixed monthly pay out by redeeming existing units at the applicable net asset value of the units. When all the units of the chosen fund have been redeemed, the SWP ends and no further pay outs are received. SWP pay outs are dependent on market-linked instruments i.e. mutual funds, so returns from the investment are not guaranteed. Depending on the type of mutual fund chosen for SWP withdrawal, the risk for the investor also varies with equity schemes being considered as potentially high risk, while debt funds being considered comparatively lower risk investments in this category.

Life insurance companies in India provide annuity plans, which are designed to regular, usually monthly, guaranteed pay out to the subscriber. The purchase of annuities requires an initial lump sum payment and are preferred by retired individuals as these plans typically feature a low level of risk along with assured returns.

Annuity plans are divided into two groups based on the length of the pay-out period — delayed annuities and immediate annuities. Immediate annuity start providing regular pay out as soon as the annuity purchase using lump sum payment is made. Whereas a delayed annuity provides money after a specific time period has elapsed subsequent to the purchase of the annuity plan.

A monthly income scheme for any family will be of great significance, as it provides a steady inflow of money. In the absence of the breadwinner, or monthly salary after retirement, such monthly payouts can offer support in meeting with recurring expenses and maintaining a standard of living.

In this way, the monthly income scheme can ensure that your family continues to enjoy financial freedom without depending on others.

You invest in monthly income scheme plans mainly to secure your family’s future for a time when you may not have regular income after retirement or in your absence. However, some of the monthly income scheme plans also provide you with significant tax benefits both in the present and future.

For instance, you can enjoy tax benefits if you invest in Senior Citizen Savings Scheme. You can avail tax deduction benefits of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. Such tax benefits on a monthly income scheme can minimize your tax liability significantly while keeping your family secure for the unseen future.

Also Read: What is Financial Planning?

Before making an investment in the various monthly income schemes, people should consider their unique requirement for regular income and portfolio diversification

Prospective investors should also keep in mind how soon they need regular income and for how long before they choose a specific MIP

When selecting a Monthly Income Plan investors should be aware of the potential risk associated with the plan – market linked schemes have the potential to offer higher returns resulting in longer term pay out compared to assured return schemes. However, market-linked schemes feature significantly higher risk as compared to assured return options.

These plans can provide additional financial security to retired individuals in addition to any pension income and savings they might still have. With an increasing life expectancy and the risk of increased healthcare bills, a consistent monthly income stream can bring financial stability, peace and comfort during retirement.

Monthly income plans provide a convenient, regular and expected cash flow, which can be especially useful for individuals who depend on their investments for living costs and/or supplementary income. The regular cash inflow can help maintain their regular expenses with ease, whether it is paying rent, purchasing groceries, paying property tax, etc. Once such regular expenses have been taken care of, once is better placed to meet any unplanned/unexpected expenses using other fund sources.

Certain monthly income plans, such as Senior Citizen Savings Schemes, Annuity Plans, etc. may provide tax advantages depending on an individual's income tax slab rate and investment holding period. For example, debt mutual fund returns are taxed according on the investor's income tax slab rate and the taxation rule is similar for dividends received from equity stocks and mutual funds. Alternatively, capital gains from equities held for periods exceeding 1 year are taxed at a lower rate of 10% on gains exceeding Rs. 1 lakh in a fiscal.

Monthly Income Plans also provide the option of diversification across different asset classes, industries and market capitalisation which helps to decrease overall risk and optimise returns of the investment portfolio. Diversification reduces overall portfolio risk by mitigating the potential impact of any single investment's under-performance.

Though the main goal of investing in a monthly income scheme is to produce a steady income flow, some investment options, such as dividend plan of equity mutual funds or dividend-paying stocks, has the potential for capital growth over the long term. So, as long as the investor is willing to tolerate a higher degree of risk, such monthly income plans have the potential of providing dual benefit of long term growth potential and regular income.