In this constantly evolving and uncertain economy, the need for robust investment plans has never been more important. Investing means making your money work for you, and there are different reasons for one to invest. You might want to invest your money to grow slowly over time, or you might want to invest to make quick profits in the short term. You might even want to invest to get a regular monthly income to make your financial situation more stable. It’s wise and important when investment planning to have an additional income stream these days to live a comfortable life so if you’re wondering how to invest in order to get a passive monthly income in India, you’ve found just the guide!
In this blog, we’ll take a look at the best monthly investment options you should consider to generate a steady monthly income and help you achieve both financial stability and growth.
Understanding Monthly Income Investments
Before we take a look at the specific ways you can invest, it’s important to understand how monthly income investments work in financial planning. Unlike the usual investment options that focus on long-term growth, monthly income plans prioritise regular payouts. These options are designed to cater to people who are seeking a consistent and reliable income stream which makes them an ideal choice for people looking to supplement their existing income.
For example, you might be investing to retire early or be financially independent – meaning you can maintain your lifestyle without working actively for money. To make this happen, you need enough savings or a source of passive income to cover your expenses.
Best Monthly Income Options You Should Consider
As an investor, there are a variety of monthly income options available to you. It is important to carefully assess your options and select the ones that align with your financial goals. So let’s take a look into the best monthly income schemes in India that can help you formulate an investment plan for generating a consistent monthly income.
| Investment Plan | Period of Investment | Expected Return (p.a.) | Risk Level | Investment Amount |
| Annuity Plans | 5-10 years | 5-7% | Low | Varies (minimum ₹10,000) |
| Equity Share Dividends | Long-term (5+ years) | 8-12% | High | Varies (minimum ₹5,000) |
| Life Insurance Plus Saving | 10-20 years | 4-6% | Low | Varies (minimum ₹25,000) |
| Post Office Monthly Income Scheme | 5 years | 7.4% | Low | Minimum ₹1,500 |
| Senior Citizen Saving Scheme | 5 years | 8.0% | Low | Minimum ₹1,000 |
| Fixed Deposits | 1-5 years | 5-6% | Low | Minimum ₹1,000 |
| Corporate Deposits | 1-3 years | 6-8% | Medium | Minimum ₹10,000 |
| Mutual Fund Monthly Income Plans | Varies | 6-10% | Medium to High | Minimum ₹5,000 |
| Systematic Withdrawal Plans | Long-term (5+ years) | 6-10% | Medium to High | Minimum ₹5,000 |
| Long-Term Government Bonds | 10 years | 6-7% | Low | Minimum ₹10,000 |
| Pradhan Mantri Vaya Vandana Yojana | 10 years | 7.4% | Low | Minimum ₹1,000 |
Annuity Plans
Annuity plans are offered by insurance companies and provide a guaranteed regular income stream in exchange for a lump sum investment that was made earlier. Since they are a low-risk option, retirees can greatly benefit from them. There are two main categories of annuity plans – Deferred annuity and Immediate annuity.
- Immediate Annuity – An immediate annuity involves receiving regular income immediately after making a lump sum payment. You pay a one-time lump sum amount to an insurance company and in return, you start receiving periodic payments, typically monthly, shortly after making the initial payment. This option is often chosen by people who are looking for a steady stream of income right away, for example, retirees who want to convert a lump sum from their retirement savings, into a regular income for their living expenses.
- Deferred Annuity – A deferred annuity means you provide money upfront, but the income payments begin after a fixed period, which is specified in the annuity contract. You make an initial payment, but instead of receiving immediate income, there’s a waiting period. This period could range from a few years to several years, during which your money grows through interest or investment returns. After the specified period, you start receiving regular payments. They are usually chosen by people who are planning for the future, such as those who want to ensure a steady income stream in their retirement but are not looking for immediate payouts. It allows the invested amount to grow before the annuity payments begin.
Equity Share Dividends
Equity share dividends are one of the most popular options available and for good reason. If you are willing to take more risk and invest in the stock market, they are a great way to generate monthly income. By investing in the stock market there are two ways in which you can make a profit – First is capital appreciation which is the profit you make as the stock price goes up and second is dividends which is the periodic payout you get as a shareholder when the company is profitable.
You can look for companies with a history of high regular dividends and invest in them but know that very rarely does a company that offers high dividends also perform well as far as capital appreciation is considered. Go for a company that can offer a blend of capital appreciation and steady income.
Life Insurance Plus Saving
Life insurance plans come with a double benefit. Of course, they offer financial protection to your loved ones in case of any unfortunate events but life insurance plans with a savings component can help you generate a monthly income. These plans provide a fixed return on the investment, and this rate remains constant throughout the entire duration of the plan and you get a set monthly payment after the maturity period is over. This payment is guaranteed.
There is another advantage that comes with these plans – under Sections 80C and 10D of the Income Tax Act, you can get tax benefits. Since these plans offer guaranteed income, the returns are not as high as other available options.
Post Office Monthly Income Scheme
Post Office Monthly Income Scheme or POMIS for short is a nice monthly income option that is provided by India Post. Since it is backed by the Government, the option is suitable for investors with low-risk tolerance who are looking for stability. One can start investing in this scheme with just Rs. 1500 up to a maximum of Rs. 4.5 lakh or Rs. 9 lakh for joint accounts. The money is invested for a tenure of 5 years and offers a fixed rate of return which is 7.4% per annum as of December 2023. This interest rate is revised every quarter so it is advised to keep a check on that. The interest rate offered is higher than most fixed deposits but the drawback is the amount of money you can invest has a limit. Under Section 80C of the Income Tax Act, this scheme also offers tax benefits.
Senior Citizen Saving Scheme
This is another scheme offered by the Government of India and is especially tailored for senior citizens, that is, people over the age of 60 to help them get a regular flow of income in their retirement. The minimum amount you can invest is just Rs. 1 thousand up to a maximum of Rs. 30 lakh. The maturity period is 5 years which can be extended in blocks of 3 years. As of December 2023, the SCSS offers a high annual rate of interest at 8.2%. It is one of the safest options available to senior investors making it a very appealing choice for retirees. You can even get tax benefits of up to Rs. 1.5 lakh under the Section 80C of the Income Tax Act.
Fixed Deposits
Investing in fixed deposits in scheduled banks is considered one of the safest options for investors in the country. A classic and reliable choice, fixed deposits offered by banks provide a fixed interest rate over a fixed period, so you can get a regular monthly income. For many people, fixed deposits remain the top choice for investment, and rightfully so as they offer an easily accessible and secure opportunity to generate income without the concerns of market conditions.
Also Read: What are The Best Investment Options For Your Child’s Future?
Corporate Deposits
Corporate deposits are offered by non-banking financial companies (NBFCs), housing finance businesses, and corporations, and present an opportunity for high returns. The interest rate is fixed for the entire duration of the investment and is usually higher than the interest rate offered by banks on fixed deposits, making them an attractive option. These deposits can be traded on the stock exchange, but do note that while they offer higher interests and greater flexibility, they are not as safe as traditional bank fixed deposits so you should closely investigate the reputation and history of the NBFC before investing. The interest you receive on these investments is also taxable.
Monthly Income Plans
Monthly Income Plans or MIPs are a type of mutual fund that aims to provide investors with regular income in the form of monthly payouts. Mutual funds that offer monthly income plans combine the benefits of capital appreciation and regular income. The mutual fund mainly invests in fixed income with a mix of equity instruments. Through these funds, one can get regular payments but due to the nature of mutual funds, the return is not guaranteed. Out of all other options, MIPs give potentially the highest returns but you have to consider your risk appetite before jumping in.
Systematic Withdrawal Plans
Systematic Withdrawal Plans or SWPs are also options through which you can get a regular income from your mutual fund investments. The money you put in gets invested in mutual funds, and the profits from these investments become your steady income. With SWPs, you can take out a fixed amount of money regularly, whether it’s every month, every few months, or once a year. This systematic approach provides a steady income while potentially benefiting from market appreciation.
SWPs work well for people who want a dependable income from what they’ve invested. Withdrawals through SWPs depend on the invested amount and the performance of the mutual fund. They offer investors a structured way to receive periodic payouts from their mutual fund investments, providing a balance between regular income and moderate risk exposure. You can apply this withdrawal strategy to various types of mutual funds, including MIPs, to create a regular income stream. Keep in mind, though, that the money you make with SWPs is taxable, and the risk involved is considered moderate due to the nature of mutual funds.
The big advantage of investing through MIPs and SWPs is that there is no limit to the amount of money that you can invest, unlike the various options backed by the Government.
Long-Term Government Bonds
These are various bonds and securities offered by the Government to raise funds for developing the country. They are offered for a long term ranging between 5 years to 40 years and during that time investors can get a monthly payment in the form of interest which averages around 7% as of December 2023. Because they are offered by the Government and their long maturity period, these bonds are a solid option for those looking for a low-risk and stable monthly income. One can easily trade these bonds in the stock exchange and the rate of interest they offer is higher than short-term bonds due to the longer maturity period.
Pradhan Mantri Vaya Vandana Yojana
PMVVY is another pension scheme that is backed by the Government and is offered to senior citizens over the age of 60. It provides a guaranteed return with monthly, quarterly, half-yearly, or annual payout options. You can earn a guaranteed interest between 7% to 9% over 10 years with the maximum amount that you can invest being Rs. 15 lakh. Pradhan Mantri Vaya Vandana Yojana aims to provide senior citizens stability in their post-retirement lives. So if you’re looking for options to generate monthly income after retirement, PMVVY is ideal as it is safe and low risk.
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Conclusion
These days due to the rise in the cost of living, it’s getting more and more important to have an additional income to supplement your regular income so you can maintain your standard of living and head towards a financially secure future. As we’ve just seen there are many great options available to generate a monthly income so you must choose the right investment option for yourself. Remember that no solution works for everyone. You must align your financial goals, risk tolerance, and investment horizon to select the monthly income plan that suits you the most.
Warren Buffett once said, “Risk comes from not knowing what you’re doing.” and he’s correct. You need to equip yourself with knowledge, study the eligibility, and weigh up the pros and cons before making a decision. You can seek professional advice by consulting with an investment planner if needed, and make informed decisions that pave the way for a financially secure future.
