Monthly Income Schemes

Monthly income schemes invest in various financial instruments like debt funds, bonds, and fixed deposits. These schemes offer regular income but the returns aren't guaranteed as they depend on the performance of the underlying investments.

What are the key features and benefits of monthly income schemes?

Monthly income schemes offer a range of features to cater to various investment needs. Here's a breakdown of some of the key features:

• Regular Income: One of the most attractive aspects of monthly income schemes is the consistent monthly payout. Investors receive a fixed sum each month, providing financial security and aiding in long-term financial planning. The payout can be either interest on the principal amount or a portion of the principal itself, depending on the specific scheme.
• Flexible Premium Payment: Monthly income schemes offer flexibility in terms of premium payment options:
  • Regular Premiums: Investors can choose to pay premiums monthly, semi-annually, or annually, making budgeting easier.
  • Lump Sum Payment: A single upfront payment can cover future premiums, simplifying the process and potentially reducing costs.
  • Limited Payment Term: Some plans allow investors to complete premium payments within a specific timeframe, reducing future financial burdens.
• Customisable Payout Options: Monthly income schemes provide a variety of payout options to suit different investor preferences and risk tolerances:
  • Guaranteed Income: Certain plans offer a fixed income for a specified period, providing financial security.
  • Growth Potential: Some plans allow investors to benefit from market gains while still receiving a steady income.
  • Flexible Payouts: Investors can choose from various payout options, such as lump sum, regular income, or a combination of both.
• Tax Benefits
  • Many monthly income schemes offer tax benefits, making them an attractive investment option. These benefits may include:
  • Tax Deductions: Investments in certain schemes, like the National Pension Scheme (NPS) and National Savings Certificate (NSC), can be claimed as deductions under Section 80C of the Income Tax Act.
  • Tax-Free Income: Some schemes may offer tax-free income payouts, further enhancing the overall returns.

Best monthly income schemes

To get the benefit of monthly income, individuals can invest their funds in different plans or schemes as mentioned below:

Fixed Deposit (FD)

Fixed deposits (FDs) are a popular investment option offered by banks and financial institutions. They involve a one-off lump sum investment for a fixed period, in return for a guaranteed interest rate.

Here are the key features of FDs:

• Fixed interest rate: FDs offer a predetermined interest rate, ensuring predictable returns.
• Flexible tenures: FDs are available in various tenures, ranging from a few months to several years.
• Interest payment options: Investors can choose to receive interest monthly, quarterly, or annually.
• Security: FDs are generally considered a safe investment as they are backed by the financial institution.

However, it's important to note that FD interest rates can fluctuate over time and may not always keep pace with inflation.

Each investment is made for the same tenure and matures in a different month. Thus, you can enjoy a monthly income after a certain period as determined when buying the scheme. By visiting the website of the preferred financial institution, individuals can easily invest in FD or SDP from the comfort of their homes.

• Senior citizen fixed deposit

Senior citizen fixed deposit are term deposit plans offered by Bajaj Finance to customers above 60 years of age. With a non-cumulative fixed deposit, senior citizens can now earn returns up to 8.85% p.a. The non-cumulative FD allows you to invest between Rs. 15,000 to Rs. 3 crore, and get interest payout at monthly, quarterly, half-yearly, or yearly basis. Seniors can benefit from a constant and reliable income stream in their post-retirement years with the regular interest payment option.

Mutual funds

There are certain mutual funds, which allow individuals to withdraw a certain amount of money on a periodical basis. It can be monthly, quarterly, semi-annually, or annual. By selecting a monthly withdrawal period, they can ensure a fixed earning after every month.

Post Office Monthly Income Scheme (POMIS)

The Post Office Monthly Income Scheme (POMIS) is a government-backed investment option designed to provide a steady monthly income. It's particularly appealing to those who prioritise regular cash flows over potential capital gains.

Key Features of POMIS:

• Guaranteed returns: POMIS offers a fixed interest rate, ensuring a reliable monthly income.
• Low minimum investment: The scheme has a low entry barrier, making it accessible to a wide range of investors.
• Flexible tenures: Investors can choose from a variety of tenures to suit their specific financial needs.
• Tax benefits: POMIS offers certain tax benefits, making it an attractive investment option.

However, it's important to note that the interest rate offered by POMIS may be lower compared to other investment options.

National Pension Scheme

The National Pension Scheme (NPS) is a government-sponsored retirement savings scheme that can provide a monthly income after retirement. It's a long-term investment option suitable for those seeking financial security in their later years.

Key Features of NPS:

• Tax benefits: NPS offers various tax benefits, including deductions on contributions and tax-free withdrawals at retirement.
• Investment options: The scheme provides a range of investment options, allowing investors to choose their desired level of risk.
• Portability: NPS accounts are portable, enabling easy transfer between fund managers and across different locations.
• Retirement benefits: At retirement, investors can withdraw a lump sum and use the remaining funds to purchase an annuity, which provides a regular pension.

While NPS is a long-term investment, it may not provide immediate returns or a monthly income during the accumulation phase.

National Saving Certificate (NSC)

The National Savings Certificate (NSC) is a government-backed investment option that offers a fixed interest rate. It's a popular choice for those seeking a safe and secure investment.

Key Features of NSC:

• Guaranteed Returns: NSC provides a fixed interest rate, ensuring a certain return on investment.
• Tax Benefits: Investments in NSCs are eligible for tax benefits under various tax laws.
• Safety: As a government-backed security, NSC is considered a very safe investment.
• Maturity Period: NSCs are non-redeemable bonds with a fixed maturity period.

While NSC doesn't offer a regular monthly income, it's a sound investment for long-term wealth building.

Why should you choose a Monthly Income Scheme (MIS)?

Monthly income schemes offer several advantages for investors seeking a steady income stream:

Regular income

• Financial security: A consistent monthly income provides financial stability, particularly for retirees or those looking to supplement their income.
• Budgeting ease: Regular income allows for better financial planning and budgeting.

Tax benefits

• Tax efficiency: Many monthly income schemes offer tax benefits, such as tax deductions on investments or tax-free income.
• Reduced tax liability: By understanding the tax implications of different schemes, investors can optimise their tax planning and reduce their overall tax burden.

It's important to carefully consider the specific features and tax implications of each monthly income scheme before investing. Consulting with a financial advisor can help you make informed decisions based on your individual financial goals.

Conclusion

Overall, monthly income schemes are a great option for those seeking a reliable and steady source of income. These schemes are particularly suitable for retirees, pensioners, and risk-averse investors as they offer both financial security and regular payouts. With a variety of options available, from government-backed schemes to fixed deposits, there's a suitable choice for every investor. Now that you have an understanding of the best monthly income schemes, you can make informed decisions to meet your specific needs.

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