Best Investment Plans for Monthly Income

Monthly Income Plans (MIPs) can be something to think about if you're looking for strategies to make your savings produce steady income without taking on a lot of risk. Maintaining financial stability is a common concern for many people, particularly retirees and those without a set monthly income. MIPs can assist in resolving the issue.

These mutual fund schemes make investments in a mix of debt securities and a lower percentage of stocks. This well-rounded strategy emphasises protecting your money while providing opportunities for profits. By paying out dividends or interest, the goal is to establish a consistent source of income.

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These payouts are not guaranteed. They rely on the availability of distributable surplus and the fund's performance. Despite that, MIPs remain a suitable choice for individuals seeking relatively stable income with moderate risk exposure.

What Is a Monthly Income Plan?

Monthly income plans are investments designed to convert your savings into a predictable cash flow, credited every month into your bank account. This income can come from fixed interest (like FDs, SCSS, POMIS), market-linked withdrawals (like SWP in mutual funds), or guaranteed payouts from insurers (like annuity plans).

Overview of Best Investment Plans for Monthly Income 2025

Post Office Monthly Income Scheme (POMIS)

Post Office Monthly Income Scheme is a government-backed small savings scheme that pays a fixed interest every month on your deposit. From 1 January 2025, the interest rate is 7.4% per annum, paid out monthly, with no TDS deducted, making it attractive for conservative savers.

• Tenor: 5 years, with a maximum investment cap (per individual and per joint account as notified).
• Risk: Very low, backed by the Government of India; suitable for retirees and risk-averse investors.

Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme is a government-backed product exclusively for individuals above a specified age (usually 60 years, with some relaxations for VRS/defence retirees). It offers higher, quarterly interest and is widely used as a core monthly/regular income source when combined with other products.

• Tenor: 5 years, extendable by additional term as per rules; interest rate is periodically revised by the government and is higher than normal FDs.
• Tax: Interest is taxable, but investment qualifies for deduction under Section 80C up to the overall limit.

Monthly Income Mutual Funds (Debt-Oriented + SWP)

Debt-oriented mutual funds or hybrid “monthly income” schemes invest mainly in bonds with a small equity component and can be used to generate monthly income via a Systematic Withdrawal Plan (SWP). Investors choose a withdrawal amount/frequency (monthly, quarterly), while the balance stays invested and continues to earn market-linked returns.

• Portfolio mix: Typically around 70-80% debt and 20–30% equity, though exact allocations vary by fund.
• Risk/return: Higher return potential than FDs over long periods but with NAV volatility; suitable for moderate-risk investors with 5+ year horizon.

SWP from Balanced or Debt Funds

Instead of choosing a dedicated “MIP” scheme, many investors use Systematic Withdrawal Plan (SWP) from high-quality short-duration debt funds or conservative hybrid funds to create a customised monthly income. Here, you invest a lump sum, set a fixed monthly withdrawal, and let compounding work on the remaining units.

• Flexibility: You can change withdrawal amount, stop SWP, or redeem fully at any time, subject to exit load and market value.
• Suitability: Works best when withdrawal rate (say 6-8% per year) is lower than the long-term expected return of the fund.

Bank Fixed Deposits and Corporate Deposits

Bank FDs remain a popular option to generate predictable interest income that can be taken monthly, quarterly, or annually. Many banks allow you to choose “monthly payout” mode where interest is credited every month rather than compounded.

Corporate deposits, offered by highly rated NBFCs and companies, can give higher interest than bank FDs in return for slightly higher credit risk.

• Risk: Bank FDs with scheduled commercial banks are very low risk; corporate FDs depend on issuer rating and financial strength.
• Liquidity: Premature withdrawal is allowed with penalty; not as flexible as mutual funds but simpler to understand.

Long-Term Government Bonds and G-Sec/SDL

Long-term government bonds and government securities (via direct bonds or debt mutual funds) can provide semi-annual coupon income that investors often treat as regular cash flow. Instead of buying bonds directly, many individuals prefer gilt or target-maturity debt funds that invest in government or PSU bonds and distribute returns through SWP.

• Credit risk: Very low, since they are backed by the central or state government, but they do carry interest-rate risk causing price fluctuations.
• Use case: Suitable for investors who want safety plus slightly better returns than savings accounts and can hold for the full maturity period.

Annuity and Pension/Retirement Plans

Annuity plans (often from life insurers) convert a lump sum into a guaranteed lifelong or fixed-period income, paid monthly, quarterly, or annually. Once purchased, the annuity rate is locked as per product terms, and the insurer is obligated to pay until the chosen term or for life.

• Types: Immediate annuity (income starts right away) and deferred annuity (income starts after a few years).
• Trade-off: Very high security and predictability, but limited liquidity and typically lower effective returns compared to market-linked options; best used to cover essential expenses in retirement.

Real Estate and Rental Income

Owning residential or commercial property and renting it out is a traditional way to generate monthly income. With SEBI-regulated REITs now available in India, investors can also tap rental-yielding commercial real estate through listed units rather than owning property directly.

• Direct property: Requires large capital, has high transaction costs, and rental yields can vary with location and market conditions.
• REITs: Listed on stock exchanges, offer periodic distributions, but values and payouts are market-linked and can fluctuate.

Performance of Top 10 Investment Plans for Monthly Income