If you are looking for a steady source of income to supplement your existing earnings, monthly income schemes are a great option to consider. These schemes are designed to provide you with a regular flow of income, usually on a monthly basis. However, with so many options available in the market, it can be difficult to choose the best one.
In this blog, we will discuss some of the best monthly income schemes that you can consider.
Fixed Deposit (FD)
Fixed deposit is a popular monthly income scheme where you deposit a lump sum amount for a fixed period and earn interest on it. The interest rate varies from bank to bank and can be as high as 6-7% per annum. The interest earned is usually paid on a monthly or quarterly basis, making it an excellent option for those looking for a steady stream of income.
Senior Citizen Savings Scheme (SCSS)
As the name suggests, this scheme is exclusively designed for senior citizens above the age of 60. The scheme offers a fixed rate of interest, currently at 7.4% per annum, which is paid out on a quarterly basis. The maximum investment amount is Rs. 15 lakhs, and the investment period is five years, which can be extended for an additional three years.
Post Office Monthly Income Scheme (POMIS)
This scheme is offered by the Indian postal department and provides a guaranteed return of 6.6% per annum, payable on a monthly basis. The minimum investment amount is Rs. 1,000 and the maximum is Rs. 4.5 lakhs. The investment period is five years, and premature withdrawal is allowed after one year with a penalty.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This scheme is exclusively designed for senior citizens above the age of 60 and provides a fixed rate of return, currently at 7.4% per annum. The scheme has a tenure of 10 years, and the maximum investment amount is Rs. 15 lakhs. The interest earned is paid out on a monthly basis, making it an excellent option for those looking for a regular income.
Mutual Funds Monthly Income Plans (MIPs)
Mutual funds offer monthly income plans that invest in a mix of debt and equity securities to generate regular income for investors. These schemes provide the flexibility to invest in either dividend or growth options, with the dividend option providing a regular payout to investors. However, the returns are subject to market risks and may vary depending on the performance of the underlying securities.
When it comes to monthly income schemes, it is important to understand the nuances of each option before making a decision. Each scheme comes with its own set of features, benefits, and risks. Here are some additional details about the schemes mentioned above:
Fixed Deposit (FD): Fixed deposits are considered to be one of the safest investment options since they offer guaranteed returns. The interest rate on FDs is fixed for the entire tenure, which can range from a few months to several years. The interest rate offered by banks can vary depending on the tenure and the amount of the deposit. Additionally, FDs are covered by deposit insurance, which ensures that your investment is protected up to a certain amount.
Senior Citizen Savings Scheme (SCSS): SCSS is a popular scheme for senior citizens who are looking for a regular source of income. The scheme offers a higher rate of interest compared to other fixed-income options, and the interest earned is tax-free. The maximum investment amount is Rs. 15 lakhs, and the investment period is five years, which can be extended for an additional three years. However, premature withdrawal is not allowed, and the penalty for early withdrawal can be substantial.
Post Office Monthly Income Scheme (POMIS): POMIS is a low-risk investment option that is offered by the Indian postal department. The scheme offers a fixed rate of interest, currently at 6.6% per annum, and the interest earned is paid out on a monthly basis. The investment period is five years, and premature withdrawal is allowed after one year with a penalty. However, the interest earned on POMIS is taxable, and the scheme does not offer any inflation-adjusted returns.
Pradhan Mantri Vaya Vandana Yojana (PMVVY): PMVVY is an exclusive scheme for senior citizens that offers a fixed rate of return, currently at 7.4% per annum. The scheme has a tenure of 10 years, and the maximum investment amount is Rs. 15 lakhs. The interest earned is paid out on a monthly basis, and the scheme offers a death benefit to the nominee in case of the investor’s demise. However, premature withdrawal is not allowed, and the scheme does not offer any tax benefits.
Mutual Funds Monthly Income Plans (MIPs): MIPs are debt-oriented mutual funds that invest in a mix of debt and equity securities to generate regular income for investors. The dividend option of MIPs provides a regular payout to investors, while the growth option reinvests the earnings to generate higher returns in the long term. However, the returns of MIPs are subject to market risks, and the performance of the underlying securities can impact the returns. Additionally, the expense ratio of MIPs can be higher compared to other schemes, which can impact the overall returns.
In conclusion
The choice of the monthly income scheme depends on the investor’s risk appetite, investment horizon, and financial goals. It is important to evaluate the options based on the interest rate, tax implications, investment period, and other factors before making a decision. Investors should also seek the advice of a financial advisor to make an informed decision and ensure that their investments align with their financial goals.
Frequently Asked Questions
Q1) What is a monthly income scheme?
A monthly income scheme is an investment option that offers a regular income payout to investors. These schemes are designed to provide a steady income stream to individuals who are looking for a reliable source of income.
Q2) What are the best monthly income schemes in India?
The best monthly income schemes in India include fixed deposits (FDs), senior citizen savings scheme (SCSS), post office monthly income scheme (POMIS), Pradhan Mantri Vaya Vandana Yojana (PMVVY), and mutual funds monthly income plans (MIPs).
Q3) Which monthly income scheme offers the highest returns?
The interest rates on monthly income schemes vary depending on the scheme and the amount of investment. As of February 2023, PMVVY offers the highest rate of interest, currently at 7.4% per annum.
Q4) Are monthly income schemes safe?
Monthly income schemes such as FDs, SCSS, POMIS, and PMVVY are considered safe investment options as they offer guaranteed returns and are backed by the government. However, mutual funds monthly income plans are subject to market risks and can be volatile.
Q5) What is the investment period for monthly income schemes?
The investment period for monthly income schemes varies depending on the scheme. For instance, the investment period for SCSS is five years, while PMVVY has a tenure of ten years.
Q6) Are monthly income schemes tax-free?
The tax implications of monthly income schemes vary depending on the scheme. SCSS and PMVVY offer tax benefits, while the interest earned on FDs and POMIS is taxable.
Q7) What is the minimum investment amount for monthly income schemes?
The minimum investment amount for monthly income schemes varies depending on the scheme. For instance, the minimum investment amount for FDs can range from a few thousand rupees to several lakhs, while the minimum investment amount for SCSS is Rs. 1000.
Q8) Is premature withdrawal allowed in monthly income schemes?
Premature withdrawal is allowed in some monthly income schemes, while it is not allowed in others. For instance, premature withdrawal is not allowed in PMVVY and SCSS, while it is allowed in FDs and POMIS with a penalty.
Q9) Should I invest in monthly income schemes?
Whether you should invest in monthly income schemes depends on your financial goals and risk appetite. If you are looking for a safe investment option that provides a regular income stream, monthly income schemes can be a good choice. However, if you are willing to take on more risk for potentially higher returns, you may want to consider other investment options, such as equity mutual funds or stocks. It is important to seek the advice of a financial advisor before making any investment decisions.
