Best Investment Plan for Monthly Income

Having an investment plan for monthly income holds significant importance in our financial lives. Having surplus funds offers a valuable opportunity to allocate them to programs that yield consistent monthly returns. This ensures that your idle capital starts generating dividends or profits.

If you're pondering how to secure monthly income through the best investment plan for monthly income in India, this article is tailored for you. Here, we present some of the best monthly income scheme investment options for generating regular income in India for the year 2024.

Best investment plan for monthly income in 2024

Monthly income offers stability and allows you to better manage your expenses. In India, there are a variety of investment options that can provide you with a consistent monthly income. This includes the Senior Citizen Savings Scheme, the Post Office Monthly Income Scheme, mutual funds, government bonds, corporate deposits, and more. Let’s understand these options in detail:

Monthly Income Plan	Minimum period of investment	Rate of returns	Investment amount	Risk	Tax benefits
ULIP Plans	5 years	9 - 12% p.a.	Rs. 1,000 - no limit	Medium to high	Available u/ Section 80 C and Section 10 (10D) of the IT Act, 1961
Annuity Plans	varies	7 - 10%	Generally, Rs. 10,000 - no limit	Low to medium	Available u/ Section 80 C and Section 10 (10D) of the IT Act, 1961
Post office monthly income (POMIS)	5 years	7.4% p.a.	Single Life : Rs. 1000 - Rs. 9 lakhs; Joint Life Rs. 1000 - Rs. 15 lakhs	Nil to low risk	Nil
Senior Citizen Saving Scheme (SCSS)	5 years (can extend by 3 years)	8.2% p.a.	Rs. 1000- Rs 30 lakhs	Nil	Available u/ Section 80 C of the IT Act. 1961
Pradhan Mantri Vaya Vandana Yojana (PMVVY)	10 years	7.4% p.a.	Rs. 1,56,658 - Rs. 15 lakhs	Low - risk	Nil
Systematic Withdrawal Plans (SWPs)	5 - 40 years	7-13%	Generally - Rs. 500 - no limit	Medium - high risk	Depends on the plan
Long-Term Government Bonds	10 yaers or more	6-9%	Rs. 10,000 - no limit	Low risk	Available u/ Section 80 10(10D) and Sec 80CCF of the IT Act, 1961
Mutual Fund Monthly Income Plans	ELSS Funds : 3 years	8-15%	Generally, Rs. 500 - no limit	Medium risk	Tax Benefits on ELSS investments u/ Sec 80C of the IT Act, 1961
Equity Share Dividends	varies	As per the market performance of underlying asset	Varies from company to company	High risk	Tax benefits up to Rs. 1.5 lakhs on ELSS dividends

 

Details of the best monthly income schemes

Before investing in monthly income schemes, it is crucial to thoroughly understand them to make an informed decision. Let's explore the various fixed-income options in detail and examine their key features.

ULIP plans

ULIPs (Unit Linked Insurance Plans) are one of the best investment options that offer the benefit of life insurance besides letting you earn a fixed monthly income. For more understanding, let’s have a look at some of the major benefits of ULIP:

• Dual benefit: ULIPs offer two main benefits—life insurance, which provides coverage/ financial protection to your family, and investment opportunities to let you grow your money by investing in different financial instruments.
• Monthly income option: You can set up a ULIP to give you regular monthly payments, which can serve as a steady income source.
• Flexibility: With ULIPs, you have the freedom to decide how much premium (money) you want to pay and which investment funds to choose (e.g., stocks, bonds, a mix of both). Also, you can fix the policy duration as per your financial goals and risk appetite.
• Investment options: ULIPs let you invest in equity funds to potentially earn higher returns, debt funds to generate safer but lower returns, and balanced funds, which are a mix of both debt and equity.
• Tax benefits:  The amount you invest in ULIPs is eligible as a deduction under Section 80C of the Income Tax Act. Furthermore, as per Section 10(10D), the maturity amount is also tax-free.
• Fund switching: With ULIPs, you can switch your money between different investment funds. This helps you adapt to market changes or adjust your strategy to meet changes in your financial goals. Such adjustments help you maximise your returns.
• Transparency: ULIPs are highly transparent and clearly show how your money is being invested and what charges are applied. Also, you can constantly monitor them to understand how well your investments are performing.
• Lock-in period: There is a mandatory lock-in period of 5 years during which you cannot withdraw your money. This is usually done to encourage you to stay invested for a longer time to build wealth.
• Partial withdrawals: After the lock-in period, you can withdraw part of your money if needed. This way, ULIPs also provide you with flexibility and extra cushion in case of financial emergencies.
• Bonus and loyalty additions: Some ULIP plans offer additional benefits like bonuses or loyalty rewards. These benefits can substantially increase the amount of money you accumulate over time.

Senior Citizen Saving Scheme (SCSS)

The Senior Citizen Saving Scheme (SCSS) stands out as a secure investment avenue exclusively tailored for senior citizens aged 60 and above. Governed by the government and accessible through select bank branches and post offices, SCSS offers an attractive annual interest rate of 8.2%, credited quarterly, over a five-year tenure. Investors can allocate up to Rs. 30 lakh to this scheme. However, it's important to note that the interest earned is subject to taxation based on the investor's applicable tax rate based on income tax slabs of FY 2024-25.

The Senior Citizen Saving Scheme (SCSS) is a safe and reliable investment option for senior citizens in India. By investing in this scheme, seniors can earn a steady fixed income. One of the major advantages of this scheme is that it is backed by the government, which makes it a low-risk choice for those aged 60 and above. Let's check out some of the key features of the SCSS:

• Eligibility: The SCSS is specifically designed for senior citizens who are 60 years old or older.
• Investment limit: You can invest up to a maximum of Rs. 30 lakhs in this scheme.
• Interest rate: Currently, the interest rate is 8.20% per year. This rate is determined and adjusted by the Government of India periodically.
• Tenure: The SCSS has a fixed duration of 5 years. You can extend this period for an additional 3 years if you choose.
• Regular income: The scheme provides a regular, steady income every month. It is particularly beneficial for senior citizens who need a consistent source of funds.
• Premature withdrawal: You are allowed to withdraw your money before the maturity period of 5 years, but this comes with some penalties. Furthermore, any such premature withdrawal is allowed only after one year from the date of investing in SCSS.
• Tax implications: The interest you earn from this scheme is subject to income tax. As per the Income Tax Act, you have to include the interest earned in your taxable income and pay tax according to your income tax slab/ bracket.
• Nomination facility: While investing in SCSS, you can nominate one or more beneficiaries. Post-nomination, the nominated person(s) will receive the invested amount in the event of your demise.
• Low risk: Since the SCSS is backed by the Government of India, it is considered a very safe investment option with minimal risk.
• Accessibility: The SCSS is available at designated banks and post offices throughout India. This way, senior citizens can easily access and invest in this scheme.

Post Office Monthly Income Scheme (POMIS)

Backed by the government, the Post Office Monthly Income Scheme (POMIS) presents a dependable investment choice for risk-averse individuals seeking regular income streams. With an annual interest rate of 7.4%, payable on a monthly basis, and a deposit period of five years, POMIS allows single investors to contribute up to Rs 4,50,000, while joint account holders can invest up to Rs 9,00,000. Starting with a minimum investment of Rs 1,500, investors can reinvest upon maturity for an additional five years.

To get more clarity, let’s check out some of its major features:

• Guaranteed monthly income: POMIS ensures that you receive a fixed and guaranteed income every month, which is beneficial for those seeking regular earnings.
• Investment limit: In an individual account, you can invest up to Rs. 9 lakhs. On the other hand, joint account holders can invest up to Rs. 15 lakhs.
• Interest rate: The interest rate applicable to the POMIS is determined by the government and is revised every quarter. Currently, the interest rate is 7.4% per year.
• Tenure: The scheme has a fixed duration of 5 years.
• Premature withdrawal: You can withdraw your money before the 5-year period, but this will incur some penalties. Moreover, any premature withdrawal is allowed only after 1 year from the date of investing in the POMIS.
• Tax implications: The interest earned from POMIS is subject to income tax according to your tax bracket.
• Nomination facility: While investing in POMIS, you can nominate beneficiaries. After nomination, they become eligible to receive the invested amount in the event of your death.
• No TDS deduction: Unlike several Fixed Deposit schemes, especially those run and operated by banks, POMIS does not deduct tax at source (TDS) on the interest earned.
• Accessibility: POMIS is available at all post offices across India. Such widespread availability makes it easily accessible to everyone.
• Low risk: This scheme is backed by the Government of India and enjoys a sovereign guarantee. Hence, POMIS is considered a very safe investment with minimal risk.

Long-Term Government Bonds

For investors seeking low-risk options, long-term government bonds serve as a viable choice. Offering maturities ranging from 5 to 40 years, these bonds provide monthly interest payments or coupon payments set by the Indian government, with the primary aim of raising funds for government expenditure.

For a greater understanding, let’s check out some of its key features:

• Maturity period: These bonds have a long-term investment horizon. Generally, they mature in more than ten years. Hence, as an investor, you usually invest your money for a long duration before getting the principal amount back.
• Fixed interest payments: Throughout the bond's tenure, the government pays you regular interest at a fixed rate. These payments are usually made semi-annually or annually.
• Coupon rate: The coupon rate, or the interest rate, is determined at the time of issuance of the bond and remains fixed through the tenure. All your interest calculations are made using the coupon rate.
• Principal repayment: At the end of the bond’s maturity period, you receive the initial amount invested or the principal amount.
• Government backing: These bonds are backed by the full faith and credit of the issuing government. In simple words, the government guarantees repayment, which makes these bonds a secure investment.
• Risk and return: Although considered safe, long-term government bonds do carry some risks related to interest rate changes and inflation. Usually, they offer higher returns compared to shorter-term government bonds due to the longer investment period and associated risks.
• Market trading: These bonds are actively traded in financial markets. Thus, you can buy and sell these bonds even before maturity in the secondary markets at the prevailing rate.
• Fixed income investment: Long-term government bonds are popular among investors who want stable and predictable income over a long period while preserving their capital. They are often seen as a reliable source of fixed income.

Corporate Deposits

Corporate deposits, offered by various non-banking financial firms (NBFCs) and housing finance companies (HFCs), offer higher interest rates compared to traditional bank deposits but entail higher risk. Before investing, thorough due diligence on the financial health and reputation of the NBFCs is essential to mitigate risks.

Monthly Income Plans (MIPs)

Monthly Income Plans (MIPs) are mutual funds primarily invested in fixed income instruments with a minor equity exposure, designed to provide investors with regular income. The income distribution is contingent upon the fund's performance, with options for growth and dividend plans. Investors must assess their risk tolerance before considering MIP investments.

For a better understanding, let’s check out some of their key features:

• Regular income: MIPs aim to provide a steady income through regular dividend payouts. This can help you meet your monthly financial needs.
• Asset allocation: MIPs invest in a combination of debt and equity instruments. Debt investments offer stability and regular income, while equity investments provide the potential for capital appreciation.
• Risk-return profile: MIPs have a moderate risk level. They balance stability (from debt investments) and growth opportunities (from equity investments) to provide a steady income with some potential for growth.
• Dividend payouts: You receive dividends regularly, which can be monthly, quarterly, or annually. These payouts provide a consistent income stream.
• Systematic Withdrawal Plan (SWP): Some MIPs offer a Systematic Withdrawal Plan that offers you some flexibility in accessing your investment. Through SWP, you can withdraw a predetermined amount periodically.
• Professional management: MIPs are managed by experienced fund managers who make investment decisions on your behalf. They aim to optimise both income generation and capital appreciation.
• Flexibility and liquidity: You can invest in or withdraw from MIPs based on your financial goals and liquidity needs. However, this is subject to the terms and conditions set by the mutual fund.
• Expense ratio: MIPs have an expense ratio, which is a fee that covers the fund's operational costs. It's important to consider this cost when evaluating the overall returns of the investment.

Pradhan Mantri Vaya Vandana Yojana

Catering specifically to senior citizens, the Pradhan Mantri Vaya Vandana Yojana offers financial security post-retirement. With fixed interest rates starting from 7.4% annually, and policy terms extending up to 10 years, pensioners can opt for monthly, quarterly, half-yearly, or yearly annuity payouts upon policy maturity.

For more clarity, let’s check out some of its key features:

• Targeted audience: PMVVY is specifically designed for senior citizens in India. This scheme provides them with financial security in their retirement years.
• Assured returns: The scheme offers a guaranteed return of 7.4% per annum. This way it creates a stable source of income for the investors.
• Investment limit: Each senior citizen can invest a maximum of Rs. 15 lakhs in this scheme.
• Tenure: The scheme has a fixed duration of 10 years. Your investment will remain in the scheme for this period.
• Monthly income: PMVVY provides a regular monthly income to senior citizens. Such stability allows them to better manage their expenses.
• Payout frequency: Investors can choose how often they want to receive their pension payouts: monthly, quarterly, half-yearly, or yearly.
• Loan facility: After three years of investing in PMVVY, you can take a loan against your policy if needed.
• Premature exit: You can exit the scheme before the 10-year period in case of a critical illness affecting you or your spouse. This facility provides flexibility in case of emergencies as it eliminates the need to liquidate your deposit.  
• Administration: The scheme is administered by the Life Insurance Corporation (LIC) of India. It handles the overall management and the payouts made by PMVVY.
• Risk-free investment: PMVVY is considered a safe investment option because it is backed by the government. Such backing makes it virtually risk-free for senior citizens.

Life Insurance Plus Saving

Guaranteed income insurance policies combined life insurance coverage with savings, ensuring a predetermined monthly payout post-maturity. This option provides financial stability for retirees while securing their family's future.

Systematic Withdrawal Plans (SWPs)

Systematic Withdrawal Plans (SWPs) cater to investors' diverse financial needs by offering a structured approach to withdrawals. Investors can customise their investment strategies based on individual requirements, whether seeking capital growth or regular income.

For more clarity, let’s check out some of its key features:

• Regular income: SWPs provide you with a steady stream of income by allowing you to withdraw money from your investment systematically.
• Flexible withdrawal amount: You can choose the amount of money you want to withdraw according to your financial needs. This facility gives you control over your income.
• Customisable frequency: SWPs offer the flexibility to choose how often you want to withdraw money. You can opt for monthly, quarterly, semi-annual, or annual withdrawals.
• Capital appreciation: SWPs can be set up to include withdrawals from both the principal amount and any capital appreciation. This way, your investment can grow over time while still providing income.
• Investment options: You can set up SWPs with various investment instruments, such as Unit Linked Insurance Plans (ULIPs), mutual funds, and other investment schemes. You can choose the most appropriate investment instrument as per your preferences and financial goals.
• Tax efficiency: The tax benefits of SWPs depend on the type of investment and the holding period. Some investments offer tax-free dividends or favourable long-term capital gain (LTCG) tax rates.
• Professional management: SWPs are managed by professional fund managers. They make most of the investment decisions to optimise your returns while managing risks. Also, they ensure efficient management of your portfolio.
• Withdrawal flexibility: You can adjust the withdrawal amounts or stop them altogether based on your changing financial needs. This gives you flexibility and greater control over your investments.
• Growth potential: SWPs offer the opportunity for your investments to grow over time. This allows you to benefit from potential market appreciation while receiving regular income.
• Risk management: SWPs can be tailored to manage investment risks. You can do so by specifying the withdrawal amounts and adjusting the investment allocations. Such modifications help maintain a healthy balance between income and capital preservation.

Equity Share Dividends

While offering the potential for consistent income and long-term gains, equity share dividends entail higher risk levels. Diversifying portfolios with multiple stocks is crucial to maintain a high dividend payout ratio and mitigate risks associated with companies that don't regularly distribute dividends.

For a greater understanding, let’s check out some of its key features:

• Monthly income: Equity share dividends can provide you with regular income. They are often distributed periodically as companies share their profits with shareholders.
• Ownership in companies: When you buy equity shares, you become part-owner of the company. This ownership entitles you to a portion of the company's profits, which are distributed as dividends.
• Cash dividends: Dividends are usually paid in cash. This gives you a direct and tangible income stream from your investment.
• Regular payouts: Companies usually declare dividends regularly, which can be monthly, quarterly, or annually. This ensures you receive a consistent income from your investments.
• Dividend yield: You can use the dividend yield to understand the income potential of your shares. It's calculated by dividing the annual dividend payment by the stock price and is expressed as a percentage.
• Potential for capital appreciation: In addition to earning dividends, the value of your shares can increase over time, thereby letting you earn capital gains. This way, you enjoy the dual benefits of growth and generate income in the form of dividends.
• Taxation considerations: Be aware that dividend income in India is subject to taxation. To determine tax liabilities, you must consider how dividends are taxed based on your tax bracket and utilise any applicable exemptions or deductions.
• Diversification benefits: By investing in shares of multiple companies, you can diversify your portfolio. It is worth mentioning that diversification helps reduce the risk of your overall investment by spreading the risk across different companies.
• Long-term investment perspective: Equity share dividends are best suited for investors with a long-term investment horizon. Over time, you can benefit from both the regular income generated by dividends and the potential for capital growth as the value of your shares increases.

Annuity Plans

Providing a steady income with relatively lower risk, annuity plans are offered by Indian insurance companies and serve as effective retirement tools. Investors can choose between deferred and immediate annuities based on their preference for receiving regular income either immediately or after a specified period.

Despite the benefits, it's essential to consider the associated fees, tax implications, and risks before investing in annuities with these investment plans for monthly income.

For more clarity, let’s check out some of its key features:

• Regular monthly income: Annuity plans offer a steady monthly income. They ensure you have a consistent flow of funds to meet your financial needs.
• Pension option: These plans act as a pension by creating a reliable income source for your retirement years.
• Flexibility in payout options: Annuity plans come with various payout options, such as lifetime annuity (provides income for your entire life), joint-life annuity (continues to provide income for your spouse after your death), and fixed-term annuity (provides income for a specific number of years). This flexibility allows you to choose the option that best suits your preferences and needs.  
• Customisable payout period: You can select the payout period based on your financial goals. This can range from a few years to your entire lifetime. Such customisation allows you to perform tailored financial planning.
• Tax benefits: Contributions made towards annuity plans are eligible for tax deductions under Section 80CCC of the Income Tax Act, 1961, up to a specified limit. This helps reduce your taxable income and, ultimately, your final income tax liability.
• Death benefit: In the event of your death, annuity plans offer a death benefit to your nominee. This ensures financial protection for your family in case of your demise.
• No market risks: Annuity plans are not linked to market performance. This means your income is stable and protected from market fluctuations.
• Guaranteed returns: These plans provide assured returns throughout the chosen payout period. This makes them an excellent source of earning fixed and secure income.
• Flexibility in premium payment: Depending on the annuity plan, you can choose between multiple options while paying the premium. Commonly, this includes a single premium, where you pay a one-time lump sum payment and a regular premium, where you pay periodic payments over time. This flexibility allows you to select the most convenient payment method.
• Long-term financial security: Annuity plans ensure long-term financial security. By investing in them, you can maintain your standard of living and meet your financial obligations during retirement or other life stages.

What is the importance of a monthly income generation plan?

Understanding the benefits associated with various best monthly income schemes is crucial, as different schemes are tailored to meet the diverse needs and preferences of investors. For individuals with stable monthly income from employment, prioritising capital appreciation and growth-oriented strategies in their investment plans is advisable.

However, it's also important to consider the best investment plan for monthly income programs that offer monthly returns to fulfil immediate financial needs post-retirement. The investment portfolio designed for income generation significantly differs from that aimed at capital appreciation. While income-generating schemes may not yield high returns favoured by many investors, they offer the assurance of a steady income stream in the future.

The passive income generated by the best investment plan for monthly income contributes to financial independence, underscoring their fundamental significance.

Factors to consider before investing in monthly income schemes

• Before investing in any of the mentioned best monthly income scheme, individuals must assess the current state of the market.
• Seasoned investors often favour the best monthly income scheme during periods of high interest rates, as higher rates lead to a decrease in net asset value.
• It's crucial for individuals to exercise caution when selecting a specific scheme, given the abundance of best investment plans for monthly income available in today's market.
• Those considering investments in Monthly Income Plans should first evaluate their own needs and requirements as investors.
• Conducting thorough research allows for a comparison of the scope, offerings, and performance of different best monthly income schemes for 2024.
• This comprehensive approach aids in understanding which type of scheme aligns best with individual goals and how to effectively leverage it.

Conclusion

Finding the right best monthly income schemes in India to generate monthly income may seem daunting, but it's actually quite achievable with proper research and understanding of the potential benefits. By thoroughly exploring the investment plans for monthly income investment options, individuals can align their financial goals with suitable avenues. It's important to consider factors like risk tolerance, investment horizon, and personal objectives when evaluating these opportunities. Take the time to assess how each plan caters to your specific needs and preferences to make well-informed decisions about your investments.

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