Generating a passive monthly income stream from your investments is a smart way to secure your financial future. If you have a portfolio of 10 lakhs, you have the potential to generate a consistent monthly income.
Before delving into the various investment options available, let’s explore how much you can earn monthly from a 10 lakhs investment.
Determining Monthly Income from a 10 Lakhs Investment
The monthly income you can earn from a 10 lakh investment depends on several factors, including the chosen investment option, interest rate, return value, and associated risk.
For safer investment options like fixed deposits, government bonds, and post office monthly income schemes, you can expect an annual return of approximately 7% to 8%. These options provide stability but may offer relatively lower returns compared to higher-risk investments.
Alternatively, investing in stocks or mutual funds can yield higher returns. However, it’s important to note that these options come with a higher level of risk. To invest in these options, you must have a demat trading account.
Let’s explore 9 investment options for regular monthly income:
| Investment Option | Risk Class | Expected Return | Monthly Income | Annual Income |
| Fixed Deposit | Low | 8% | 6,700 | 80,000 |
| Government Bonds | Low | 8% | 6,700 | 80,000 |
| POMIS | Low | 7.4% | 6,200 | 74,000 |
| SCSS | Low | 8.2% | 6800 | 82,000 |
| Corporate bond | Moderate | 10% | 8,300 | 1,00,000 |
| MIP Mutual funds | Moderate | 9% | 7,500 | 90,000 |
| Mutual Fund SWP | High | 12% | 10,000 | 1,20,000 |
| Dividend Stocks | High | 10% | 8,300 | 1,00,000 |
| Options Trading | High | 5% monthly | 5,000 | 60,000 (on 1 lakhs) |
Diversify Your Investment Portfolio for Monthly Income Based on Risk Allocations
Low-Risk Low-Reward Portfolio Allocation
If your risk appetite is low, you have several options to diversify your 10 lakh portfolio. In addition to fixed deposits, you can consider investing in government bonds, POMIS (Post Office Monthly Income Scheme), and corporate bonds, all of which provide a steady annual return of 7-10%.
Additionally, if you are willing to take on a bit more risk, allocating 1 lakh towards option trading can provide the potential for additional monthly returns. You can also check out the list of best brokers for option trading that offers lower brokerage charges for option trading.
Here’s a breakdown of how you can allocate your 10 lakhs:
- Fixed Deposits (FD): Invest 4 lakhs in fixed deposits, which offer stability and guaranteed returns of 8% to 9%.
- Sovereign Gold Bonds (SGB): Allocate 2 lakhs (equivalent to 30-35 grams) to SGBs, which provide a fixed interest rate of 2.5% per annum along with potential value appreciation. The interest is paid every 6 months.
- Post Office Monthly Scheme (POMS): Invest 2 lakhs in POMS, a safe investment option that offers a regular monthly return of 7.4%.
- Corporate Bonds (CB): Allocate 1 lakh to corporate bonds, which provide higher yields of 10% return compared to government bonds.
- Option Trading: Consider allocating 1 lakh towards learning and exploring option trading for potential additional monthly returns of around 5%. You can also use the paper trading apps to practice your trading strategies without risking real money.
Medium-Risk Medium-Reward Portfolio Allocation
On the other hand, if your risk appetite is high and you are open to taking more risks, you can consider the following diversification for your 10 lakh portfolio:
- Fixed Deposits/Post Office Monthly Scheme (FD/POMS): Invest 2 lakhs in these low-risk instruments to maintain stability in your portfolio.
- Sovereign Gold Bonds (SGB): Allocate 1 lakh to SGBs for exposure to the gold market, which can act as a hedge against market volatility.
- Corporate Bonds (CB): Allocate 1 lakh to corporate bonds to earn higher yields compared to government bonds.
- Monthly Income Plan (MIP) Mutual Funds: Invest 1 lakh in MIP mutual funds, which provide a combination of income and capital appreciation.
- Systematic Withdrawal Plan (SWP) Mutual Funds: You can allocate 1 lakh to SWP mutual funds, which allow you to receive regular withdrawals from your investment.
- Dividend Paying Stocks: Invest 1 lakh in dividend-paying stocks, which can provide regular income through dividend payouts.
- Option Trading (Option Selling with Hedge): Consider allocating 3 lakhs towards option trading, leveraging your higher risk appetite to potentially generate additional returns.
If you want to explore investment options with higher capital, you may like to read how to invest 50 lakhs for monthly income in India.
Factors to Consider for Rs. 10 Lakh Monthly Income Investment Portfolio
#1. Determine Your Risk Appetite
The first step in selecting the right investment option is understanding your risk appetite. If you are willing to take on higher risks for potentially higher returns, mutual funds or stocks are suitable options for you.
However, if you have a low-risk appetite, fixed deposits or post office schemes are more appropriate.
#2. Define Your Financial Goals
Consider your financial goals when choosing an investment option. If generating regular income is your primary objective, monthly income plans can be a suitable choice.
On the other hand, if long-term wealth creation is your goal, mutual funds or stocks are more appropriate.
Suppose you aim to generate a higher income, such as 10,000 rupees per month. In that case, you’ll need to invest in options that offer a minimum annual return of 12% on your 10 lakh investment.
#3. Clarify Your Purpose of Investment
It’s important to determine whether you’re investing for retirement planning or seeking a passive source of income. If your investment is intended for retirement purposes and you rely solely on the monthly return, consider relatively safe investment options.
For passive income, where you have other active sources of income and aim to create wealth, diversify your portfolio with stocks and mutual funds. Instead of focusing on monthly income, target annual returns.
You can also learn how to earn 30,000 per month online without any investment.
#4. Consider the Investment Tenure
The investment tenure refers to the duration for which you’re willing to invest your money. Generally, longer tenures offer higher return potential.
For short-term investment goals, fixed deposits or post office schemes are suitable. For long-term goals, consider mutual funds or stocks.
You may like to read – how to invest 25 Lakhs for monthly income in India
Best Investment Options to Invest 10 Lakhs for Monthly Income
#1. Fixed Deposits with Banks
Fixed deposits offered by banks are a popular investment option for generating regular income. With this option, you can choose a monthly payout to create a steady monthly income from your Rs. 10 lakh investment.
Fixed deposits provide interest payouts on a monthly basis, which can be utilized to cover your monthly expenses. The interest rate on fixed deposits varies depending on the bank, deposit amount, and tenure.
For higher interest rates on FDs, you can choose the small finance banks that provide attractive 8-9% interest rates on special category days compared to public or private banks.
For example,
- Jana Small Finance Bank offers 8.50% interest rate on a special 500-day deposit for regular citizens.
- Ujjivan Small Finance Bank offers 8.25% interest rate on a special 560-day deposit for regular citizens.
In addition to the aforementioned rates, senior citizens can enjoy an additional interest rate of 0.50%.
Expected Return: 8-9%
Average Monthly Income: Rs. 6,700 – 7,500, You can earn Rs. 10,000 monthly by investing 15 lakhs in India. You may like to read how much monthly income can you earn by investing 15 lakhs.
- Low risk investment
- Guaranteed returns
- Suitable for old style investors
- Fixed returns
- Relatively low returns compared to other options
- Taxable interest income
#2. Corporate Deposits or Company Fixed Deposits
Similar to fixed deposits, corporate deposits are offered by non-banking financial companies (NBFCs) instead of banks. They generally provide higher interest rates but come with higher risk.
You can go with the monthly payout option to generate a monthly income from your 10 lakh investment.
The interest on corporate deposits depends on the issuer and bond rating. AAA-rating bonds are considered the safest but offer lower interest rates compared to lower-rated bonds.
Credit rating for all below mentioned companies is CRISIL- FAAA & ICRA – MAAA.
| Company Name | 1 Yr | 2 Yr | 3 Yr | 4 Yr | 5 Yr | Senior Citizen |
| HDFC Limited | 7.10% | 7.10% | 7.35% | 7.45% | 7.30% | 0.25% |
| HDFC Limited (Green & Sustainable Deposit) | – | 7.25% | 7.30% | 7.20% | 7.20% | 0.25% |
| Mahindra Finance Ltd | 7.40% | 7.60% | 7.70% | 7.75% | 7.75% | 0.25% |
| Bajaj Finance Ltd | 7.40% | 7.50% | 7.55% | 7.35% | 8.05% | 0.25% |
| Shriram Transport | 7.60% | 8.05% | 8.25% | 8.35% | 8.50% | 0.50% |
| ICICI Home Finance | 7.00% | 7.00% | 7.35% | 7.45% | 7.45% | 0.25% |
To purchase corporate bonds, you can visit the official websites of the respective companies and complete the application form available online.
However, for companies like Bajaj and Mahindra Finance Ltd, you may need to fill out the offline application form.
Similar to FD against OD, you can also take loans on Corporate bonds. The sanctioned amount depends on financial institutions.
Go through our article how to invest in bonds in India to learn more about the different ways to invest in corporate bonds.
Expected Return: 8% – 10%
Average Monthly Income: Rs. 6,667 – Rs. 8,333
- Higher returns compared to fixed deposits
- Suitable for investors with moderate risk appetite
- Fixed regular income
- Default risk associated with the issuing company
- Interest income is taxable
- Market volatility can impact returns
#3. Government Bonds
Government bonds are debt instruments issued by the central or state government under the supervision of the Reserve Bank of India.
Government bonds are safer than corporate bonds. Government bonds have tenures ranging from 5 to 40 years, with interest payouts every six months.
Types of Government bonds
- Fixed rate bonds
- Sovereign gold bonds
- Inflation-indexed bonds
- PSU Bonds
- Zero Coupon Bonds
You can invest in Sovereign Gold Bonds (SGB) that give you 2.5% interest rate which is paid every 6 months and gold price return.
Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India and were introduced in 2015 with tax exemption on investment amount on maturity.
You can apply for SGBs through various channels, including Nationalized Banks, Scheduled Private Banks, Scheduled Foreign Banks, designated Post Offices, Stock Holding corporations of India Ltd. (SHCIL), and authorized stock exchanges.
The bond has a tenure of eight years, and you have the option to exit after the fifth year. The minimum investment amount for SGBs is one gram.
Expected Return: 8%
Average Monthly Income: Rs. 6700
- Safest investment options
- Regular interest payments
- Diversified your investment portfolio can help reduce overall portfolio risk
- Lower returns compared to riskier assets such as stocks or corporate bonds.
- Limited premature exit options for some bonds
#4. Post Office Monthly Income Scheme (POMIS)
Post Office Monthly Income Scheme (POMIS) is a reliable and government-backed savings scheme in India that aims to provide you with a regular monthly income.
Under the POMIS, you can deposit a maximum amount of Rs. 9 lakhs in a single account or Rs. 15 lakhs in a joint account. You can earn a fixed interest rate on your investment.
The interest earned on the investment is paid out on a monthly basis, providing you with a regular income stream to meet your financial needs and obligations.
The tenure of POMIS is set at 5 years, and the interest rate is revised every quarter to ensure competitive returns for you.
How to invest in POMIS Scheme
To open a POMIS (Post Office Monthly Income Scheme) account, you need to visit the nearest post office.
Simply complete the application form and submit it, along with the required identity and address proof documents.
It’s important to note that currently, there is no online facility available to open this type of account.
Expected Return: 7.4%
Average Monthly Income: Rs. 6,167
- Low risk nature
- High level of security for funds
- Guaranteed return on investment.
- Ideal for conservative investors
- Lower returns compared to other investment options
- Interest earned through POMIS is taxable, as per your income tax slab
You would like to read – best apps to invest in US stocks from India
#5. Monthly Income Plan (MIP) Mutual Funds
Monthly Income Plan (MIP) mutual funds are debt-oriented funds that offer regular monthly income. MIP invests in a mix of debt and equity instruments to generate stable returns. The allocation is typically 70%-80% in debt instruments and the remaining in stocks.
While MIPs aim to provide consistent income, the payout amount is not fixed and guaranteed. It depends on the fund’s performance, and negative returns are possible.
You can choose an MIP plan only if it offers a minimum of 2% higher return than fixed deposits. You may like to read the best broker for mutual funds in India.
Expected Return: 9%
Average Monthly Income: Rs. 7,500
- Higher returns compared to fixed deposits and POMIS
- Ideal for you with moderate risk appetite
- Risk involved in mutual fund investments
- Subject to market risks
- No guaranteed returns
#6. Senior Citizen Saving Scheme (SCSS)
The Senior Citizen Saving Scheme (SCSS) is a government-backed savings scheme designed for senior citizens. It provides regular monthly income by depositing a lump sum amount and receiving a fixed interest rate every quarter.
The maturity period is five years, extendable for an additional three years.
If you are 60 years old, you can deposit a maximum of 30 lakhs in SCSS. It offers low risk as a government scheme but provides lower returns compared to dividend stocks and mutual funds.
Steps to open a Senior Citizen Saving Scheme (SCSS) account:
- Authorized Banks: Visit an authorized bank, collect the SCSS application form, fill it out, and submit it with the required documents.
- Post Office: Visit the nearest post office, obtain the SCSS application form, fill it out, and submit it with the necessary documents.
After submitting the application, the bank or post office will process it and open your SCSS account. Ensure you have the required identity and address proof documents.
Expected Return: 8.2%
Average Monthly Income: Rs. 6800
- Low risk
- Guaranteed returns
- Government-backed security
- Suitable for senior citizens
- Lower returns compared to dividend stocks and mutual funds
#7. High Dividend Paying Stocks
Investing in stocks that pay regular dividends can provide a source of regular income. While dividend stocks may not offer monthly income, you can calculate based on annual dividend payouts.
You can invest in dividend stocks if you want exposure to the stock market and the option for regular income.
I have researched the highest dividend-paying stocks in India, with dividend returns ranging from 6.22% to 15.57%. You can consider large-cap stocks that offer 8% to 10% annual dividends, along with potential long-term price appreciation.
Expected Return: 10%
Average Monthly Income: Rs. 8300 (consider additional returns from stock price appreciation)
- Exposure to the stock market
- Potential for Capital Appreciation
- Suitable for investors with a long-term investment horizon
- Lower Volatility
- Reduce or eliminate dividend payments
- Exposed to market risks
- Limited growth potential compared to high-growth stocks
#8. Systematic Withdrawal Plans (SWPs)
Systematic Withdrawal Plans (SWPs) allow you to withdraw a fixed amount from your mutual fund at regular intervals.
You can invest a lump sum amount in mutual funds and choose a fixed monthly withdrawal frequency. You can select monthly, quarterly, half-yearly, or yearly withdrawals.
SWPs offer the option to withdraw only the capital gains while keeping your invested capital intact. You can consider equity mutual funds for higher returns.
However, during market downturns, you may have to sell units at a loss to maintain the fixed withdrawal amount.
Expected Return: 12%
Average Monthly Income: Rs. 10,000, You can earn Rs. 1,00,000 monthly through SWP mutual funds by investing 1 Crore in India. You may like to read how much monthly income can you earn by investing 1 crore.
- Highest monthly income potential
- Flexibility in withdrawal amounts
- Suitable for investors with a long-term investment horizon
- May require selling mutual fund units at a loss
- Returns depend on market performance
#9. Options Trading
Options trading can be a part of your investment portfolio to earn monthly income. However, it is a high-risk, high-reward investment option that requires knowledge and experience.
Allocate 10% to 20% of your portfolio to options trading if you have expertise in this area. With the right strategies, you can aim for a 5% monthly return on your investment. You can check the list of best option trading apps in India.
Before you begin options trading, it’s essential to choose the right platform. You can explore the list of free demat and trading accounts that offer zero AMC fees. This allows you to start options trading without incurring unnecessary costs and enhances your overall profitability.
Expected Return: 5% monthly
Average Monthly Income: Rs. 5,000 (on 1 lakh investment)
- High return potential compared to other options
- Liquidity
- Flexibility in investment amount
- High risk involved
- Requires knowledge and expertise
- Market volatility can lead to significant losses
- No guaranteed returns
You can go through our article on zero brokerage trading account in India.
Conclusion
You can choose investment options that align with your risk appetite, financial goals, and purpose. Diversify your portfolio for a long-term investment horizon to manage risks and generate regular income.
You can consider the various options mentioned above and tailor your investment strategy to meet your specific requirements.
FAQs
Yes, there are tax implications on the monthly income generated from investments in India. The tax treatment varies depending on the type of investment and the applicable tax laws.
Here are some key points to consider:
- Fixed Deposits: The interest earned on fixed deposits is taxable as per the individual’s income tax slab rate.
- Dividends: Dividends received from stocks are taxed differently based on whether they are distributed by an Indian company or a mutual fund. Dividends up to Rs. 5,000 are tax-free for individual investors, but any amount exceeding that is taxable at the rate of 10%.
- Rental Income: Rental income from properties is taxable under the head of “Income from House Property” as per the income tax slab rate. Standard deductions and other expenses related to the property can be claimed for tax benefits.
- Capital Gains: If you sell investments such as stocks, mutual funds, or property, the gains may be subject to capital gains tax. The tax rates differ based on the holding period and the type of asset (short-term or long-term).
Retirees may opt for a more conservative allocation, such as 70% in lower-risk options and 30% in moderate or higher-risk investments.
A balanced approach could involve investing 50% in stocks/mutual funds, 30% in moderate-risk options, and 20% in stable investments like fixed deposits or government schemes.
Rental properties can provide a steady monthly income, but they require active management and come with associated costs and risks.
Diversifying your investment portfolio is key. You can Allocate funds to a mix of low-risk, moderate-risk, and higher-risk options based on your age, financial goals, and risk tolerance.
Yes, investing in stocks or mutual funds has the potential for higher returns, but it comes with greater risk.
Typically, safe options offer annual returns ranging from 7% to 8%.
Absolutely! It’s important to review and adjust your investment strategy periodically to adapt to changing market conditions and personal circumstances.
