Monthly income schemes are designed to provide a regular income stream while balancing risk and return.
Whether you are a retiree looking for a regular cash flow or a working professional seeking passive income, there are various investment options available in India that cater to this need.
However, you must carefully evaluate each option, considering factors such as risk, return potential, and investment horizon, before making any investment decisions.
Factors to Consider for Monthly Income Schemes in India
#1. Income Stability
Look for investment options that offer consistent returns and a reliable income stream, such as fixed deposits, dividend-paying stocks, or certain types of mutual funds.
#2. Risk Tolerance
Assess your risk tolerance before selecting a monthly income scheme. Some options, like high-dividend stocks, may carry higher risks but offer the potential for higher returns, while others, like government bonds or fixed deposits, provide more stability but lower yields.
#3. Investment Horizon
Consider your investment time frame or horizon. Some schemes, like long-term government bonds, may have lock-in periods, while others, like mutual funds or dividend stocks, offer more flexibility in terms of liquidity and duration.
#4. Returns on Investment
Compare the potential returns offered by different monthly income schemes. Look for options that provide attractive yields or dividend rates that align with your income requirements and financial goals.
#5. Tax Implications
Understand the tax implications associated with the chosen monthly income scheme. Certain investment avenues, like fixed deposits, may attract tax on the interest earned, while others, like dividends from equities, may have different tax rates or exemptions.
Consider diversifying your monthly income portfolio across different investment avenues to spread the risk. By investing in a mix of options, such as fixed deposits, mutual funds, and dividend stocks, you can potentially enhance your overall returns and minimize the impact of volatility.
#7. Market Conditions
Keep an eye on market conditions and economic factors that may impact the performance of your chosen monthly income scheme. Stay updated with relevant news, market trends, and interest rate movements to make informed decisions.
You can check out our latest article – report on upcoming IPOs 2023-24
10 Best Monthly Income Schemes in India
#1. Senior Citizens Savings Scheme (SCSS)
Senior Citizens Savings Scheme (SCSS) is a government-backed savings scheme in India that is specially designed for senior citizens. The interest rate is calculated and credited to the account on a quarterly basis.
The interest rate for the first quarter (April-June) of the fiscal year 2023-24 is 8.2% per annum. This interest rate is revised every quarter.
The SCSS has a fixed investment tenure of five years. You can extend it for an additional three years. The minimum investment amount required to open an SCSS account is Rs. 1,000, while the maximum limit is set at Rs. 30 lakhs.
The SCSS offers relief under Section 80C of the Income Tax Act. This means that the principal amount invested in the scheme is eligible for tax deduction up to a maximum limit of Rs. 1.5 lakhs. However, the interest earned is taxable as per the individual’s income tax slab.
Eligibility to open the SCSS account
- Senior citizens who are Indian residents and have attained the age of 60 years or above are eligible to open an SCSS account.
- In some cases, individuals who are 55 years or above but less than 60 years old and have retired on superannuation or under a voluntary retirement scheme can also open an SCSS account.
Guide to open the Senior Citizen Saving Scheme (SCSS) account:
- You need to visit designated bank branches or post offices that offer the SCSS scheme.
- Collect the SCSS application form.
- Fill in the required details.
- Submit the filled application form along with necessary documents like Aadhar, PAN, and photo.
- Once the application is submitted, the bank or post office will process it and open your SCSS account.
Average Monthly Return: 8.2%, You can earn Rs. 34,200 monthly by investing 50 lakhs In India. You may like to read how much monthly income can you earn by investing 50 lakhs.
#2. Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) is a popular monthly income scheme offered by the Indian Postal Service. It provides a safe and reliable investment option for you.
POMIS offers a fixed interest rate of 7.4%, making it an attractive choice for conservative investors seeking stable monthly returns. The interest is credited to your account on a monthly basis, providing a steady source of income.
The investment tenure for POMIS is five years. When the POMIS investment matures, you can reinvest for another five years.
You can open a POMIS account with the minimum investment amount is Rs. 1,000 and multiple of Rs. 1000. The maximum limit for a single account is Rs. 9 lakhs. For joint accounts, the maximum limit is Rs. 15 lakhs.
Average Monthly Return: 7.4%
#3. Mutual Funds with Systematic Withdrawal Plans
Systematic Withdrawal Plans (SWPs) in mutual funds that allow you to withdraw a predetermined amount of money at regular intervals. You can choose the frequency of withdrawals such as monthly, quarterly, semi-annually, or annually.
SWPs are available across different types of mutual funds, including equity funds, debt funds, hybrid funds, or balanced funds. If you are looking for higher returns, you can consider investing in equity mutual funds.
SWPs allow you to withdraw only the capital gains on your investments while keeping the initial investment intact.
However, during market downturns, the value of mutual fund units may decline. To maintain the fixed withdrawal amount, you may need to sell more units, including those at a loss.
Average Monthly Return: 12%, You can earn Rs. 1,00,000 monthly through SWP mutual funds by investing 1 Crore in India. You may like to read how to invest 1 crore to get monthly income return.
#4. Fixed Deposits with Monthly Payout
Fixed deposits are a reliable and secure investment option that guarantees returns. Fixed deposits come with a lock-in period and provide interest income.
You have the option to choose regular payouts of the interest income on a monthly, quarterly, half-yearly, or yearly basis. This type of FD is known as a non-cumulative fixed deposit.
If you invest Rs. 15 lakhs in a fixed deposit, you can earn monthly interest income based on the fixed deposit interest rate offered by the bank. You can also diversify your investment portfolio with small amount of 15 lakhs to earn monthly income with low risk and high risk investment plans.
The minimum deposit amount varies from one bank to another, but it is typically around Rs. 10,000. The interest rate offered depends on the bank, deposit amount, and tenure.
If you’re looking for higher interest rates, you can consider small finance banks, especially on special category days.
|FD Interest Rates
|Jana Small Finance Bank
|Ujjivan Small Finance Bank
|For Senior citizens – Additional 0.50% interest rate
#5. Corporate Deposits
In India, Non-Banking Financial Institutions (NBFCs) offer an investment option known as corporate deposits or company deposits. These deposits generally offer higher interest rates compared to regular fixed deposits offered by banks.
The corporate deposits are high liquidity. The interest earned on these deposits is typically credited either quarterly or half-yearly, based on the agreement between the investor and the NBFC.
Similar to fixed deposits with banks, the interest rate on corporate deposits is predetermined and guaranteed. Additionally, senior citizens often enjoy a higher interest rate compared to other citizens.
Before investing in corporate deposits, it’s crucial to check the credit rating of the NBFC. Credit ratings provided by agencies like ICRA and CRISIL indicate the creditworthiness of the company. It is essential to invest in companies with a strong credit rating to ensure the safety of your investment.
It’s important to note that corporate deposits are not insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Therefore, evaluating the credit rating becomes even more critical as it helps assess the company’s financial stability and reliability.
Credit rating for all below mentioned companies is CRISIL- FAAA & ICRA – MAAA.
|HDFC Limited (Green & Sustainable Deposit)
|Mahindra Finance Ltd
|Bajaj Finance Ltd
|ICICI Home Finance
#6. Long-Term Government Bonds
Long-term government bonds are debt instruments issued by the Central or State Government with the aim of financing the country’s economic and financial needs and regulating the money supply.
These bonds are issued under the supervision of the Reserve Bank of India. The duration of these bonds can range from 5 years to 40 years, providing you with a long-term investment option.
You can invest in different types of long-term government bonds –
- Treasury bills
- Dated government securities
- Inflation index bonds
- Fixed-rate bonds
- Zero-coupon bonds
- Capital index bonds
- PSU Bonds
- Sovereign gold bonds (SGB)
These bonds offer a stable interest rate, lower risk, and liquidity for buying and selling in the open financial market. Additionally, as per RBI regulations, the interest accrued on these bonds must be disbursed to the investors every 6 months.
While the SGB is a great investment option that offers a fixed interest rate of 2.5% per annum along with potential appreciation in gold prices.
The tenure of bond is eight years, and you have the option to exit after the fifth year. You can apply SGB from banks, post offices, authorized stock exchanges and online platforms.
Average Monthly Return: 8%
#7. Monthly Income Plan (MIP)
A Monthly Income Plan (MIP) is a mutual fund investment scheme that aims to provide you with a regular income stream on a monthly basis.
In a Monthly Income Plan, a portion of the investment is allocated to debt instruments such as fixed income securities, bonds, or debentures, which generate regular interest income. The remaining portion is invested in equities to provide the opportunity for capital growth. This allocation helps balance the income and growth aspects of the investment.
The interest income and dividends earned from the debt and equity components of the MIP are distributed to you as monthly payouts.
It’s important to note that while MIPs aim to provide a regular income, they are subject to market risks. Fluctuations in interest rates, credit quality, and stock market performance can impact the returns.
You should carefully consider their risk tolerance and investment horizon before investing in MIPs.
Average Monthly Return: 9%
#8. Equity Share Dividends
Equity share dividends refer to the portion of a company’s profits that are distributed to its shareholders. These dividends are paid out on a regular basis and are typically expressed as a percentage of the face value of the share.
Companies that are financially sound and profitable often distribute dividends to their shareholders. Investing in dividend-paying stocks can provide a reliable source of income.
While these stocks may not offer monthly income, you can estimate your earnings based on the annual dividend payments.
During my research, I have identified the top dividend-paying stocks in India, offering dividend returns ranging from 6.22% to 15.57%.
When considering dividend stocks, it is advisable to focus on large-cap stocks that provide annual dividends in the range of 8% to 10%. This approach offers the potential for long-term price appreciation in addition to regular income.
Average Monthly Return: 10% (You can consider additional returns from stock price appreciation)
#9. Option Trading
Option trading refers to the buying and selling of options contracts, which give you the right to buy or sell an underlying asset at a predetermined price within a specified period.
Option trading can provide opportunities for generating a regular income return of around 5% on your investment. You can employ strategies such as selling covered calls or cash-secured puts to collect premiums from options buyers. By selling these options, you can earn income on a monthly basis.
Option trading offers flexibility, as you can choose your desired strike prices and expiration dates based on your risk appetite and market outlook. However, it’s important to note that option trading involves risks, including the potential loss of the invested capital if the market moves against the chosen position.
To engage in option trading, it’s advisable to have a good understanding of options, their pricing, and the associated risks. If you want to do option trading you can start investing with Rs 5000 as an initial investment.
Average Monthly Return: 5%
#10. Rental Income Through Properties
Investing in rental properties can provide a monthly rental income stream. By purchasing a property and renting it out, you can earn rental income that supplements property value appreciation.
However, it’s important to consider factors such as vacancies, repairs, and tenant issues.
Average Monthly Return: 4%, you can also check out the best investment schemes to double your money.
Frequently Asked Questions (FAQs)
Yes, you can choose to reinvest the monthly income earned from these schemes to compound your returns. Many schemes offer the option to reinvest dividends or interest earned, allowing you to potentially enhance your overall returns over time.
Yes, diversifying investments across multiple monthly income schemes can help spread risk and optimize returns. Investing in different asset classes and schemes can provide a well-rounded income portfolio.
Yes, through systematic withdrawal plans (SWP), you can receive a regular monthly income by redeeming a fixed amount from your mutual fund investment at regular intervals.
You can consider the factors such as income stability, risk and return profile, investment horizon, liquidity needs, tax implications, and the reputation of the financial institution offering the scheme when selecting the right monthly income scheme in India.
The safety of monthly income schemes depends on the type of investment. Fixed deposits with reputable banks, government-backed schemes, and well-established dividend-paying stocks are generally considered safer options.
The highest monthly income in India can be generated through investments in high-yield fixed deposits, dividend-paying stocks with attractive dividend yields, option trading, corporate deposits, or SWP mutual funds designed for regular income.