Best Monthly Income Plan

A monthly income plan, as the name suggests, is a scheme where the individual receives a certain sum of money every month. This money generally accrues after a few years of payment of the premium. The name, monthly income plan, is more of a mutual fund industry parlance, and these types of plans are mostly referred to as monthly guaranteed income plans, assured monthly income plans or monthly pension plans in the life insurance sector. Unlike a MIP offered by the mutual fund companies, the monthly income policies offered by life insurance companies also have an insurance cover to protect the insured party and in some cases, a maturity benefit payment at the end of the policy tenure. This makes the plan slightly different from the pure play MIPs that mostly pay a monthly payout to the investors. Some of these mutual fund plans provide the provision for a lump sum payment though being a non-insurance product; the monthly income plans from mutual funds do not have an insurance cover.

Best Monthly Income Schemes for 2019

Aggressive Monthly Income Plan

1st Annualized Returns

3rd Annualized Returns

5th Annualized Returns

Launch Date

Birla Sun Life MIP II Wealth 25

16.24%

17.42%

13.95%

22-May-04

ICICI Pru MIP25-Regular Plan

11.43%

14.36%

12.25%

30-Mar-04

HDFC MIP- Long Term Plan

12.48%

15.09%

11.76%

26-Dec-03

Kotak MIP Regular Plan

13.75%

13.81%

11.60%

29-Dec-03

UTI MIS Adv

10%

13.65%

11.56%

16-Dec-03

Conservative Monthly Income Plan

1st Annualized Returns

3rd Annualized Returns

5th Annualized Returns

Lunch Date

SBI Magnum MIP

12.67%

13.11%

11.60%

24-Mar-01

Birla Sunlife MIP II Saving 5

12.71%

12.95%

11.17%

22-May-04

SBI Magnum MIP-Floater

10.88%

12.80%

11.41%

21-Dec-05

ICICI Pru MIP-Regular Plan

9.68%

12.22%

10.67%

10-Nov-00

Franklin Mip

10.48%

13.57%

11.60%

28-Sep-00

 Best Monthly Income Plan Vs Debt Product

Criteria

MIP

FD

Post Office Monthly Scheme

Fixed Maturity Plan

Average Return rate

6-12%

7-8%

8%

9-10%

Risk Involved

Low Risk

No

No

Low Risk

Assured Monthly Income

No

Assured

Assured

Not Available

TDS

No

Yes

No

No

Complexity

Moderate

Easy

Easy

Moderate

Max Limit

No limit

No limit

4.5lakh for single and 9 lakh for joint account

No limit

Early Withdrawal Penalty

1%

1% less interest will be paid

2% before 3 years

1% after 3 years

0-2.5%

Tax on Return

Before 1yrs

As per your tax slab

After 1 yrs

10% or 20% with Indexation

As per your tax slab

As per your tax slab

Before 1 yrs

As per your tax slab

After 1 yrs

10% or 20% with Indexation

Types of Monthly Income Plans

Investors should note that life insurance companies offer various types of monthly income plans. Some may start the monthly investment plan payout after the premium payment period has ended while some may start when you are also paying the policy premium. There are also different in terms of the insurance cover, entry age, and the benefits that are offered and so on. If you are looking for a MIS scheme that can take care of your monthly income then you should spend some time at PolicyBazaar to understand the various types of plan on offer. We provide details on the type of plan, its features, what it provides in terms of benefits, entry age, etc. We also have information on online money income plans that can be easily purchased within a few minutes straight from the comfort of your home. Each plan has its own benefits and it makes sense to do your homework before you purchase the best monthly income plan. 

Though most investors in India stick to the monthly income plans offered by industry leaders such as an LIC or SBI, there are quite a few other companies that have come up with different monthly income scheme for investors. We have also provided a few plans at the bottom of this page for you to check. Please note, there are other plans in the market beyond these and you can use our website to enter the relevant criteria and get the investment plans that meet your needs. The inclusion of these monthly income schemes are only for your reference and to show the variety in terms of benefits, entry age, guaranteed monthly income and so on. 

Features of Best Monthly Income Plan

The best monthly income schemes provided by the insurance companies are in essence individual life insurance policies where the annuity or lump sum amount paid on the maturity of the traditional life policy has been broken up into two (mostly optional) parts: the monthly income, and the lump sum payment that is paid at the end of the policy payment period. The monthly income from these plans may start during the tenure of the policy payment period or after when the premium payment period ends. As highlighted, the lump sum amount is generally paid at the end of the policy payment and will include the guaranteed maturity benefit, generally called the sum assured, and any bonus amounts – interim and / or terminal that may have been declared by the insurance company. More details are provided below under the relevant sub-section. 

  • Monthly Payment

    A monthly income plan as the name suggests offers a regular payout option per month. This payout is guaranteed and the insured individual does not have to worry whether they will receive the amount due to them every month. The payment is generally made in the form of direct bank deposit through the Electronic Clearing Service (ECS) option offered by all banks. This payment is made to the designated account of the policyholder. The insured has the option to change the account details before the payouts start or even during the payout period. They can also stick to the savings account they had mentioned in the application form. 

    Different policies offer different MIS scheme payout options. Some may start the payout after a few years from the start of the policy when the premium still needs to be paid, while others may start the payout after the premium payment period has ended. What option you choose will depend on your financial needs and the plans in the future.  

    In most cases, the payout is given a certain percentage of the sum assured. For instance, if the plan says that 10% of the sum assured will be paid per year spread equally overall all 12 months, then for a sum assured of say, Rs. 12 lakh and a payout period of ten years, the annual payout would be 10% of Rs. 12 lakh. This would mean an annual payout of Rs. 1.2 lakh and a monthly payout of Rs. 10,000. 

  • Lump Sum Benefit at Maturity

    Most of monthly income schemes offer a lump sum benefit at the end of the policy period. This lump sum benefit is generally optional as individuals can ask for the lump sum amount to be paid as a part of the monthly benefit. The reason insurance companies offer this payment as a onetime amount has to do with the nature of expenses in a normal individual’s life. Even though, a monthly income scheme helps the insured to get regular payments that they can use for their normal living expenses, they need a larger sum at the time of retirement. This sum helps them to meet larger expenses such as renovating their house in their hometown before they move in, buying a house (if required), relocation expenses, and all other costs that crop up immediately after retirement.

    The lump sum benefit comprises of the sum assured at maturity, and the reversionary, interim and / or terminal bonus amounts. The lump sum amount may also be paid in instalments depending on the terms and conditions of the monthly income scheme and or the choice of the policyholder.

  • Insurance Cover

    The best monthly income scheme from life insurance companies come with a life insurance cover. This insurance helps the insured to plan for the future of their loved ones in case the unfortunate comes to pass. The most common types of monthly income scheme offers the sum assured plus any bonus that many have been declared by the company before the amount became due. Some plans such as LIC monthly income plan, monthly income plan SBI or those from other insurance companies may also offer a higher sum that equals a certain factor of the premium paid until date.

    Some of the insurers also have the option of this insurance cover being paid in instalments, if required. They provide the insured or the nominees the option to choose the payout that suits them best. This custom payment option offered by the best monthly income scheme helps the payee to structure the payout according to their needs, and help them to meet large expenses such as children’s education or marriage, if required.

  • Bonus Amounts

    The bonus amounts offered in a MIS schemes is mostly given at the end of the policy when the last payment is made. Some plans may offer the bonus amount to accrue over a certain number of years so that the insured individual or their nominees get a higher amount that they can use to pay off large expenses. The bonus amount comprises of three types: reversionary, interim and terminal bonus. 

    • Reversionary Bonus: This is an amount that is declared by the insurance company as a percentage of the sum assured. This is declared on an annual basis depending on the company’s yearly performance and adds on to the amount due at the end of the policy period of the monthly income plans. The reversionary bonus consists of two types: the simple reversionary bonus that does not add on to the sum assured and the compound reversionary bonus that adds to the sum assured. In the latter case, the bonus for the next year is always more than the bonus for the previous year, provided the same percentage of bonus is declared. This is because the bonus amount of the previous year has been added to the sum assured of the monthly investment policy, thereby increasing the amount. 

    • Interim Bonus: The interim bonus, as the name suggests, is declared in the interim period of the policy and is generally dependent on the performance of the insurance company. If declared, it adds on to the overall bonus amount the insured would get on maturity of the policy or what the nominees would receive if the unfortunate comes to pass. 

    • Terminal Bonus: This bonus is paid by the insurance company at the end of the policy period. It is given at the discretion of the company and generally declared to show the insurer’s appreciation of the individual continuing with the policy and paying their premium on time over all these years.  

  • Premium

    The premium of monthly income plans include annual, half-yearly, quarterly, monthly, or lump sum amounts that are paid by the insured to the insurance company to keep the policy in force. A MIS scheme may offer the insured party the option to choose between any of the payment periods. In most cases, the insured has the option to skip between various payments intervals, subject to certain restrictions that the insurance company may lay down.  

    The amount of premium paid in the best monthly income scheme and the period for which it is paid varies from policy to policy. Some monthly income schemes may offer the premium to be paid for a certain number of years and then start the payouts to the insured after the premium payment period has ended. Alternatively, some plans may ask the premium to be paid for a certain number of years and then a reduced premium paid as the rest of the premium are deducted from the payouts due to the insured party.  

    The type of premium payment option chosen and the amount paid also has ramifications from the point of view of income tax. For instance, if a single premium payment is opted for, then the insured will only receive a tax deduction up to the limits specified under section 80C of the Income Tax Act. The rest of the premium will not qualify for a deduction. The best monthly income plan is the one that allows the insured to make the maximum use of the provisions given under sections 80C and 10(10D) of the Income Tax Act. 

  • Optional Payout Choices

    Most of the best monthly income schemes offer optional payout options for the insured and his or her nominees. Most of these plans offer a monthly payout option as well as lump sum payout options after a certain interval of months or years. The best monthly income plans offer a range of payout options to the insured that they can use to their advantage. Some of the standard payout options are: 

    • Monthly Payouts: Under this option, the insured or his / her nominees will receive a fixed sum every month. Some of the insurance companies offer the option to pay a higher amount in the later part of the payout period to counter the effects of inflation or to provide a better source of income after the insured person has retired. 

    • Lump Sum Payment: If all of the payouts are in the form of monthly income, then this lump sum amount includes the bonus amounts that may have been declared by the insurance company. In other cases, this includes a large sum than the monthly payout and is given to the individual to meet large expenses that may arise in the course of life, such as after retirement. The best monthly income plans also offer the option to get this amount in stages every few years instead of as a single large amount at the end of the period. 

  • What to Consider Before Buying Monthly Income Plans?

    Monthly income plans help the insured to get a guaranteed return for himself or his nominees, in the event of him not being around to provide for them. Some things that one needs to consider before opting for a MIS scheme are what are the returns they are looking at, the time period of the payouts and the premium, the type of income generation required if the unfortunate comes to pass, and so on. Each factor will be influenced by the investor’s earnings, their present lifestyle and the future lifestyle they seek, the tax savings plans they want and so on. Let us look at what the investor needs to do before they buy a monthly investment plan. 

  • Decide if You Need Monthly Income Plans

    Monthly investment plans are a smart way to receive guaranteed regular income and insurance cover at the same time. In some instances, the insurance companies offer the insurance cover even after the premium payment period and the payout period has ended. This helps the insured to give his nominees a protection of sorts in the event of anything happening to him. The best monthly income plans provide a hassle free way of making sure that a regular income comes in each month, without the insured having to worry about it.  

    These plans are ideal for retired individuals and those seeking definite returns without having to think about the security of their capital. The fact that monthly investment plans do not erode the capital makes them a good choice for conservative people looking for capital protection, rather than capital growth. The monthly income plan ensures you have a risk free monthly investment plan that comes in every month like clockwork without you having to worry about the market performance or having to keep a tab on the returns of your investments. 

  • Check What Your Income Will Be When You Retire

    A monthly income plan is ideal for people looking for an investment payout option after they retire and which secures them a guaranteed monthly income, and an insurance cover at the same time. However, investors need to understand what their income would be like after retirement before they opt for a monthly investment plan. If they already have a PPF or another pension fund that will help them live in the style and comfort they prefer, and also have an insurance cover that will insure them well into their nineties, then these plans may not be an ideal option. However, if the payout from the pension fund is not enough or if the person needs regular payouts at certain stages of life to meet future expenses, then the monthly investment plans need to be looked at.  

    There are different monthly payment plans. Some like the monthly systematic withdrawal plans offered by the mutual funds provide a good option. However, they have their own set of limitations like the dividend payout option eating into the capital if market returns for the plan are not good and so on. This makes the monthly investment plans from insurance companies a better option. And the fact they come with their own insurance cover for the investor is like the proverbial icing on the cake. Nonetheless, all things aside, these factors are crucial while deciding on the question being discussed under this topic, viz., what the income after retirement would be. If it is not nearly enough and you think you need a secure option that will pay you a regular income without erosion of capital, then look no further than a best monthly income plan offered by any of the life insurance companies. 

  • Look at the Insurance Cover You Have

    An insurance policy protects more than the insured’s life. It provides a host of other optional benefits that the person can for as riders. These may include accident and disability cover, critical illness rider and many more. In addition, it provides security to the family in case the worst comes to pass. It may seem like a worn out cliché but it is true that life is uncertain, whether people choose to realize it or not. If you are the only breadwinner of the family, it is imperative that you take steps to ensure you keep your family secure if they have to cope with life without you. Having a life insurance policy gives you the peace of mind you need to take care of your spouse, your children and other dependents like your parents, your in-laws, siblings, and other loved ones who depend on you for your strength and wisdom.  

    If you are looking at the best monthly income plans available in the market, then you must also consider the insurance cover you have got right now. If you have a traditional policy that pays a lump sum amount or have a guaranteed income plan that makes payments after every few years, then it’s time you choose a plan that ensures your family and loved ones receive a monthly income to help them pay for the living expenses.

Check Before You Buy Best Monthly Income Plan

Buying a MIS scheme is quite easy and most insurance companies offer their best monthly income plan for you to check and buy from their own website or from online comparison companies like PolicyBazaar. Online money income plans offer a cost-effective way to buy insurance as all details are now available at our fingertips through a website or your phone. Let us look at some questions that often go unanswered when you intend to buy monthly investment plans. 

  • Online or Traditional Route

    For those of you wondering whether to buy a policy online or through traditional channels, you must note that the online money income plans offer the same payout option as the traditional policies though the cost of the online money income plans may be slightly less due to reduced cost. This is because the insurance agent is missing from the transaction between you and the insurance company in online money income plans. As such, the company can give you the online money income policy at a discount, as they do not have to pay the agent. This means your overall income will be more from an online money income plan, as you are saving some money from reduced costs.  

    Moreover, the online money income plan offers you great convenience. Whether you are sitting at home and trying to find the best plan for yourself online on your laptop or desktop, or you are commuting to or from work and trying to find the best plan for yourself, the advent of the ubiquitous internet and the smartphone has meant that can you check the plans you want, whenever you want and from wherever you want. This has freed up enough time in your hands to check in detail what your needs are and how you can take care of them using the monthly income plans. You can also buy the plans from the convenience of your home or anywhere else, whenever you prefer. 

  • What is the Cost of the Plan

    The direct cost of most plans is hidden in the details. And it makes sense to check this point before you buy the policy. Not many insurance agents will tell you the cost if you do not ask for the information. That is why sites such as PolicyBazaar are a great way to find the details no one tells you. From understanding the cost of the plan when you buy the online money income plan or later when you start receiving the money, this is one factor you must know before you make a purchase. The bigger players will generally offer a better deal in terms of direct plan cost. For example, plans such as the monthly income plan SBI or LIC monthly income plan will have lower direct costs than other players.  

    Most people would only look at these direct cost of the plan that range from just above 1% to around 4% or thereabouts in most cases including online money income plans. However, certain other factors add to the overall cost of the monthly investment plans. For instance, receiving the payouts well before the premium payment period ends means that you can use the sum received to pay off the premium amount that is owed. So, in one way you are saving money. The best monthly income plans offer more payouts than the premium you need to pay, and you can use the excess money to buy secure investments that keep your money safe. The returns from these best monthly income investments will add up over the years and will help in reducing the overall cost of the plan. 

  • Best Time to Buy a Monthly Investment Plan

    The March 31st deadline for making tax saving investments for the financial year means that most of the insurance policies and mutual funds are sold in the last month of the fiscal year. This should not be the case. Though it is true that insurance helps save tax but looking at insurance plans and especially monthly investment plans only from the perspective of tax is a very shortsighted way to plan your finances.  

    The best monthly income plans are those that will help you get a regular retirement income when you are not working any more. This means that these plans whether online money income plans or traditionally purchased ones will secure your future. With the rapid development of healthcare infrastructure and wellness standards in the country, most people in their 30s to 50s are likely to live well into their eighties and even nineties. This means that if you retire at 60, you are likely to live for another 40 years, a period that is more than the time you will have spent working. Let us illustrate how much you will need with an example.  

    Assuming you need only Rs. 10,000 per month, you will need Rs. 10,0000 x 40 (years) x 12 (months in a year), which equals Rs. 48 lakh. Remember, this is assuming zero inflation (which is unlikely to happen), so the overall money you need is likely to be much more. Taking Rs. 20,000 instead of Rs. 10,000 will mean you will need close to a crore or even more. Adding another Rs. 10,000 means you will need nearly Rs. 1.5 crore. If this sounds scary, then it should act as a wake up alarm for you.  

    Do not look at MIS scheme as a way to save tax, see it for what it actually is – a way to save your future, and to live your life with dignity. Invest in the best monthly income plans whether they are online money income plans or not, whether plans from traditional giants like LIC or SBI at any point of time – whether it’s March or July or October. 

Benefits of Best Monthly Income Plan

The best monthly income policies offer a large number of advantages. From a secure income that you or your nominees will receive no matter what, to getting a large insurance cover at the same time, a monthly investment plan offers the best of both worlds to the investors. If for nothing else, people should also opt for these plans for their low risk profile. With market volatility a part and parcel of the economy and likely to continue well into the future, these online money income options offer the investor a bankable policy that will hold good in times of need. 

  • You Get Guaranteed Regular Income

    This is said to be the most advantageous feature of money income plans as they offer the insured individuals or their nominees a guaranteed income in the future. They did not have to worry about whether stock market volatility will affect their income or not, as the monthly investment plans ensue that the assured amount is paid into their designated bank accounts each month. Moreover, the near certainty of bonus payments adds to the advantage money income plans have over other market linked units. The definite nature of the income cannot be stressed enough and is a great incentive for people who are working the private sector and do not have an adequate amount of savings accumulated in their pension funds. 

  • You Get Insurance Cover

    Monthly investment plans offer a specific cover for the insured, in addition to a number of optional add-on riders. This gives the insured parties and their nominees a safe and secure cover in case an unfortunate event comes to pass. Optional covers protect against any loss of income from critical illnesses, from an accident and disability or from loss of the policy due to the failure to pay the premium for any reason. These are only a few of the optional riders available. Most insurance companies offer money income plans as a dual benefit policy for their customers – one which gives them a guaranteed monthly income and an insurance cover to boot. In addition, the cover from the best monthly income plans ensure the nominees receive the sum assured and / or the monthly payouts in the way they prefer. Most of the policies such as monthly income plan SBI, LIC monthly income plan or any other money income plan from other insurance companies has different payout options for the insured amount depending on the needs of the nominees. These may include lump sum payment, regular monthly payment or a combination of the two, among others. 

  • The Bonus Amounts Increase the Overall Payout

    The best plans including online money income policies offer bonus amounts, generally at the end of the plan period. This overall amount includes the reversionary bonus amount, the interim bonus, if any, and the terminal bonus amount. The reversionary bonus is declared by an insurance company at the end of each year as a percentage of the sum assured. Even assuming an average of 1% simple interest bonus each year, a 20 years policy will provide the insured party a 20% bonus amount of the sum assured at the end of the policy period. The total bonus adds up to a significant amount and can be used by the insured to meet large expenses such as home renovation, children’s college fees and so on. This bonus amount is also paid to the nominees of the insured in case the unfortunate comes to pass. 

  • Their Tax Benefits Reduce Your Overall Tax Outgo

    The online money income plans as well as monthly income plans brought the traditional way offer tax benefits under section 80C and section 10(10D) of the Indian Income Tax Act. This implies your income is considerably reduced and if you are lucky, you are also able to get your income tax slab reduced to a lower tax slab on the rung. Income tax assessees should do their tax calculations at length as the amount of premium; sum assured and payout have a large bearing on the amount of tax. 

    Section 80C allows for a deduction of Rs. 1.5 lakh overall provided the amount has been used by the assessee in the way allowed under the section. Also, section 10(10D) mentions that the payout to be eligible for deductions must be from a policy where the premium in a fiscal year must be less than 10% of the sum for which the assessee has been insured. 

  • You Have Better Control of Your Future

    You can choose the payment option you prefer from monthly payment plans depending on your needs. If you believe you need the funds only after you retire and that is still say at least 20 years away, then it is better to take a policy that pays after you retire. The increase in the number of years you are going without payout means that your investment will grow that much more and you will get better returns. Alternatively, you can opt for a monthly investment plan that starts the payout while you are still paying the premium. You can use this payout to pay the premium and use the remaining funds to buy secure debt funds. This will help you to increase your overall asset base and you will have more funds after you are retired. Plans like the LIC and SBI monthly income plan, or from other parties offer a variety of payout options that the insured or the nominee can choose according to their specific requirements. 

Best Monthly Income Plans from Providers

Most insurance companies in India offer online money income plans that help the insured and his or her nominees to get a guaranteed monthly income along with a lump sum payment, if the plan allows, at the end of the plan tenure. The companies offer various customization options to their online money income policies and generally allow customers to choose between various premium payment and payout options. 

  • Bharti AXA Life Monthly Income Plan Plus

    The monthly investment plan starts the payouts after the end of the premium payment period. The plan gives the insured the option to choose the monthly payout of their choice, which in turn determines the premium. It offers reversionary bonus that is paid at the end of the policy period. The company provides a premium discount for monthly income plan with a longer term such as 20 or 30 years. Optional riders include accident death benefit, hospital cash and premium waiver. 

  • Canara HSBC Oriental Bank of Commerce Life Insurance Smart Monthly Income Plan

    The plan offers a life cover for the policy term of 25 years and a guaranteed monthly income for 15 years. The insured has the option to set off the payout receivable against the premium due from the eleventh to the fifteenth year. The sum assured is 100 times the monthly income opted for by the insured. The plan offers annual bonuses and a final bonus.

  • Max Life Monthly Income Advantage Plan

    The Max Life Monthly Income Advantage Plan offers monthly payouts over a 10 year period with the amounts in the last five years being double the amounts given in the first five. The payments start right after the premium payment period ends in this online money income plan. The policy also offers a guaranteed terminal benefit that is paid at the end of the payout period, and offers the insured party the flexibility to get the whole amount as a lump sum. 

  • MetLife Monthly Income Plan – 10 Pay

    The company offers a monthly income plan that pays for 15 years. The plan has a 10 year premium payment tenure. It offers a reversionary bonus in addition to the insurance cover for the individual. The plan can be purchased through an advisor or from the company’s branch and offers a monthly income from Rs. 1,500 to Rs. 1 lakh.

What is Monthly Income Plan?

Monthly Income Plan belongs to the category of hybrid mutual fund and is essentially a debt oriented scheme. In monthly income plan, majority of the investments are made in money market instruments or debt funds. As monthly income plans are hybrid in nature, it provides low-risk and consistent return to the investors.

As monthly income plans are similar to mutual fund investment, the investments made in it are subject to market risk and thus the returns are not guaranteed.  Even though, it might suggest guaranteed returns to the investors. The returns generated by this type of hybrid funds depend on the availability of the distributed surplus and is paid out to the investors in form of dividends. Having said this, the returns offered by monthly income plan have significantly higher returns as compared to the fixed deposits. Therefore, monthly income scheme is considered as a low-risk investment option for conventional investors.

Taxation on MIPs

As a monthly income plans are debt oriented funds, it is taxable. All the rules of long-term capital gains tax (LTCG) and short-term capital gains tax (STCG) are applied to MIPs too. For example, in case the investors dispose the units before the completion of 3 years, then STCG (Short-term capital Gain Tax) is added to his income. These are taxed based on the income tax slab, the investor falls under. On the other hand, if the units are held for more than 3 years then 20% of LTCG (Long-term Capital Gain Tax) is applied.

However, the investors are eligible for indexation benefit and no tax is applied on the dividends in hands of the investors. The 25% of dividend distribution tax is charged by the fund house, before the dividends are distributed.

The individual who comes under the higher tax bracket can consider investing in dividend option, as they can avail tax-benefit as compared to the other traditional plans. The individual who falls under the lower tax bracket can consider investing in growth option rather than investing in dividend option in order to reduce tax-liability and achieve higher returns.

How MIP is Different from Other Fixed Investment Options?

Monthly income schemes are hybrid instruments wherein a small part of portfolio around 5%-25% is invested in equities and the rest 75%-95% of portfolio is invested in debt and money market instruments. As the name suggests monthly income plan aims to provide monthly income to the investors.  In monthly income plan, the investors can avail the dividends on annually, half-yearly, quarterly or monthly instalments as per their own choice.

The major difference between monthly income plan and fixed investment options is that, in MIS  scheme the returns totally depend on the market performance of the fund, whereas the fixed investment option offers assured returns to the investors.   However, as compared with fixed investment options, monthly income plans are tax-efficient and the dividends declared under MIPs are tax-exempted.

Normally, MIS scheme are a great option of investment for investors, who are planning for retirement and those who wants to generate sufficient income so that they can meet their monthly expenses. However, the investors should consider the risk factor before making investment in MIPs. Monthly income plan can be used as an additional source of income along with the regular income of the individual.

How can you get Monthly Income from Mutual Funds?

Mr. Rajesh Gupta gets provident fund dues of Rs.25lakh on retirement. He wants to make investment of Rs.10Lakh in a scheme with an objective to gain regular income. The financial advisor of Rajesh Gupta suggests him two regular income investment options- mutual fund monthly income plan and a bank monthly income scheme. However, as Banks MIS offers guaranteed income Mr. Rajesh chooses to invest in Bank monthly income scheme.

A bank monthly income scheme is similar to bank fixed deposit in which the interest earned is paid at a regular interval. Whereas, monthly income plan is a debt mutual fund scheme in which a small part of funds are invested in equities. MIS scheme provide regular income in form of half-yearly, quarterly and monthly dividend payouts.

Even though, the returns on mutual fund monthly income plans are not guaranteed, it offers higher returns and hence can be a better option of investment. The investors who do not want to deal with the fluctuating income from monthly income plans dividend option can choose systematic withdrawal plan, which allows regular payment of pre-determined amount. A systematic withdrawal plan under monthly income plan works as a monthly source of income for investors, same as a bank MIS.

In systematic withdrawal plan, the investors can decide both the amount and periodicity of payouts. The payouts can be made from principal amount and capital appreciation. Besides this, in SWP the investors are accountable to pay short-term and long-term capital gain tax.

Post Office Monthly Income Scheme (POMIS)

Among various different banking services and products offered by Post Office, the Post Office Monthly Income Scheme is one of the best option of investment. POMIS is highly reliable as it comes under the purview of the Finance Ministry.  In post office monthly income scheme, one can make a maximum investment of Rs.4.5 lakh for single account holder and Rs.9lakh for joint account holder. The maximum tenure of investment in Post Office Monthly Income Scheme is of 5 years and offers an interest rate of 7.7% per annum, payable monthly.

As a government backed investment option, POMIS is one of the safest options of investment for investors who wants to avail regular income. The payouts are made one month from date the first investment is made. One can start investment in post-office monthly income scheme with a minimum investment of Rs.1500. Moreover, in order to get double benefit, the investors can reinvest the amount post maturity in the same scheme for another 5 years.

Fixed Deposit Monthly Income Plan

Fixed Deposit Monthly Income Plan is an ideal option for investors who want to gain regular fixed income on monthly basis. A fixed deposit monthly income plan is a type of term deposit, wherein the interest earned is directly credited back to the account of the investors per month. The monthly income fixed deposit scheme earns an interest similarly as regular fixed deposits. Some of the key benefits and features of fixed deposit monthly income plans are:

  • Some banks offer the limit of minimum and maximum amount that one can deposit in these accounts.
  • For monthly income fixed deposits, the interests are generally paid at a discounted rate.
  • Some banks also offer the option of half-yearly, quarterly or monthly income plans.
  • Some of the fixed deposit monthly income scheme comes with credit rating which shows that how good the plan is.
  • Almost all the deposits provide the facility of nomination.
  • Some of the banks deduct TDS on the interest earned.
  • The maximum rate of interest offered by FD Monthly Income Plans is 7.25%.

Best monthly income Funds to invest in 2019

Fund Name

                                                                           Returns                                            Launch Date                                                                                   

 

1 year

3 years

5 years

 

SBI Debt Hybrid Fund

5.75%

7.13%

9.01%

March 24, 2001

ICICI Prudential Regular Savings Fund

7.02%

9.82%

10.75%

March 3, 2004

UTI Regular Savings Fund

3.95%

7.66%

9.22%

December 12, 2003

Franklin India Debt Hybrid Fund

5.27%

6.41%

8.69%

September 28, 2000

IDFC Regular Savings Fund

6.81%

7.64%

8.6%

February 25, 2010

Kotak Debt Hybrid Fund

4.34%

7.27%

8.72%

December 2, 2003

Reliance Hybrid Bond Fund

6.04%

7.22%

8.62%

December 29, 2003

Sundaram Debt Oriented Hybrid Fund

2.51%

6.89%

9.54%

March 8, 2010

SBI Multi Asset Allocation Fund

5.7%

6.38%

8.5%

December 21, 2005

DSP Regular savings Fund

0.30%

5.31%

6.57%

June 11, 2004

Best Monthly Income Plans to Consider

  • SBI Debt Hybrid Fund

    As one of the best monthly income scheme, this is an open ended scheme which majorly invests in debt and money market instrument. The funds also invest in equity and equity related instruments. The main objective of the scheme is to offer regular returns to the investors so that they can accumulate wealth over a long period of time. This scheme is best suitable for mid-term and long-term investments in order to achieve capital growth and regular returns. Under this scheme, 25% of the asset is invested in equity and the rest 75% of the asset in invested in debt and money market instruments, thus reducing the risk profile and volatility. SBI debt hybrid fund is best suitable for individuals who wants to earn a regular income and has moderate risk appetite.

  • ICICI Prudential Regular Savings Fund

    As one of the best monthly income plan, this is an open ended scheme, which aims to generate regular income by making investment predominantly in debt and money market instruments. The fund also focuses on to generate long-term capital growth by making a small portion of investment in equity and equity related instruments. Under this fund option, 13.92% of asset is invested in equity and 77.41% of investments are made in debt funds and low-risk securities. This scheme is best suitable for mid-term and long-term investments in order to achieve capital growth and regular returns.  ICICI Prudential Regular Savings Fund monthly income scheme is best suitable for individuals who wants to earn a regular income and has moderate risk appetite.

  • UTI Regular Savings Fund

    This is an open ended scheme which predominantly invests in debt and money market instrument with an objective to provide regular income to the investors.  Under this scheme, a part of the portfolio is also invested in equity and equity related instruments with an aim to provide capital appreciation to the investors over a long period of time.   Under this fund option 25% of the investment is made in equity instruments which include large-cap, mid-cap and small-cap stocks and 71% of the asset is invested in debt instruments. As a low risk investment option this fund is best suitable for investors who wants to avail regular income along with the benefit of capital appreciation in long-term.

  • Franklin India Debt Hybrid Fund

    As one of the best monthly income scheme, As an open ended scheme, Franklin India Debt Hybrid Fund majorly invests in debt fund and 25% of maximum investment is made in equities. The main objective of the fund is to generate regular income from fixed income market by managing the fund’s portfolio actively. This fund is best suitable for individuals who want to make long-term investment and who want to gain regular income along with the benefit of capital appreciation.

  • IDFC Regular Savings Fund

    This is an open ended hybrid scheme which predominantly invests in debt and monthly market instrument. Under this scheme, a part of the portfolio is also invested in equity and equity related instruments with an aim to provide capital appreciation to the investors over a long period of time.  Under this fund option 24% of the investment is made in equity instruments which include large-cap, mid-cap and small-cap stocks and 49.79% of the asset is invested in debt instruments. As a low risk investment option this fund is best suitable for investors who wants to avail regular income along with the benefit of capital appreciation in long-term.

  • Kotak Debt Hybrid Fund

    This is an open ended hybrid fund. The major objective of the scheme is to enhance returns by making investment in debt instruments with a moderate exposure in equity and securities related to equity. Under this scheme, the investment is made in mix of high credit debt funds and money market instruments. As only 24% of the asset is invested in equity instrument, it reduces the risk and result in optimum return.  Under this fund option 24.49% of the investment is made in equity instruments which include large-cap, mid-cap and small-cap stocks and 75.53% of the asset is invested in debt instruments. Kotak Debt Hybrid Fund is best suitable for individuals who wants to earn a regular income and has moderate risk appetite.

  • Reliance Hybrid Bond Fund

    This is an open ended hybrid fund with an objective to generate consistent return to the investors along with the benefit of capital appreciation by making investment in mix of securities comprising, equity and equity securities and fixed income instruments. Under this fund option 12% of investments are made in stocks which comprise large-cap and mid-cap stocks and 83% of investments are made in debt and low-risk securities. This plan is best suitable for individuals who have a high risk appetite and who want to gain regular returns along with the benefit of capital growth in a long-term period.

  • Sundaram Debt Oriented Hybrid Fund

    This is an open ended hybrid funds which aims to generate regular income and capital growth by making investment majorly in fixed income securities and equity and equity related securities. The fund is consistently performing good in market and best suitable for individual who wants to have a regular flow of income along with the benefit of capital growth in a long-term period. In this scheme 24% of investment is made in equity and equity related instrument and 68.82% of investment is made in debt and low risk securities.

  • SBI Multi Asset Allocation Fund

    As one of the best monthly income plan, this is an open ended scheme, which provides an opportunity to the investors to make investment in an actively managed portfolio of multiple asset classes. In this fund option the investment is majorly made in a mix of equity, debt and commodity instruments. Based on the factors like market dynamics, macro-economic factor and issuer specific factors, investment in debt instruments are made. The monthly income scheme fund includes moderately high risk and is best suitable for individuals who have a high risk appetite and who want to gain a regular return on investment.

  • DSP Regular savings Fund

    As one of the best monthly income scheme, this is an open ended hybrid fund which aims to generate attractive returns to the investors. The fund also seeks to generate capital appreciation by making small portfolio investment in equity instruments. Apart from equities, the fund majorly invests in quality debt securities and money market securities in order to generate regular return and meet the liquidity requirement. Under this scheme, 25% of the asset is invested in equity and the rest 72% of the asset in invested in debt and money market instruments, thus reducing the risk profile and volatility. As a low risk monthly income scheme investment option this fund is best suitable for investors who wants to avail regular income along with the benefit of capital appreciation in long-term.

Q:

Who Should Invest in Monthly Income Plans?

Ans:

Monthly Income Plan is most suited for people like housewives, retiree and those individuals who want to earn additional income or extra return over the surplus earning from the fixed deposit plan. However, while you plan to invest in MIP, be aware about the amount of money your scheme can invest in stocks.

Q:

How are Monthly Income Plan Taxed?

Ans:

As monthly income plans are debt fund therefore the taxation is similar as debt fund

Short term capital gains- Any profit made before the completion of 1 year will be considered as short term capital gain. The short term capital gain is added to the income and taxed according to slab rate. So, for those investors whose income comes under higher tax slab it is not wise to sell their MIP before the completion of a year. This can result on higher tax amount on your profit.

Long Term capital Gain- Under long term capital gain any profit gained after the completion of 1 year will be taxable at 10% without indexation and 20% without indexation, whichever is lower.

Short Term and Long Term Capital Loss- The major benefit of monthly income plan as compared to fixed deposit or post office saving schemes is that if you face loss in MIP, you can cover it off against the capital gain in the ongoing year or within next 8 years.

Dividends- Dividends offered by monthly income plan are tax deductible in the hands of the investors.

Q:

What are the benefits of Monthly Income Plan?

Ans:

The monthly income plan has numerous benefits in its kitty to offer.

  1. The monthly income plan has numerous benefits in its kitty to offer.
  2. It offers a regular flow of income in particular interval of time.
  3. There are various monthly income plans that also offer insurance cover.
  4. The bonus amount surges the overall payout.
  5. The tax benefit of MIP reduces the overall tax outgo of the investors.
  6. You can achieve your short term and long term financial goals with the help of MIP.
Q:

What are the different types of Monthly Income Plan?

Ans:

Monthly income plans are generally debt oriented mutual funds that come with two options:-

  1. MIP with the Option of Dividend- under this option the income is offered in form of dividend. The investors can receive the income in monthly, quarterly, half- yearly and annually.
  2. MIP with the Option of Growth – under this option the money is not paid to the investors in form of dividend whereas it keeps on multiplying in the mutual fund.
  3. How to choose the right MIP?

In order to choose the right MIP scheme there are certain things that should be kept in mind like:-

  1. First and foremost thing is to decide whether you want to invest in monthly income plan.
  2. Check on your retirement income i.e. how much will you earn after retirement.
  3. Have a look on all the insurance cover you have.
  4. Check on the online or traditional route before you buy a monthly income plan.
  5. The cost of the plan
Q:

Differences between Aggressive and conservative Monthly Income Plan?

Ans:

Under conservative monthly income plan 15-30% of the investment is made in equity securities and the rest in debt instrument. In conservative MIP the profit is offered as regular income in form of monthly, quarterly, half- yearly ad yearly option.

Under aggressive monthly income plan the returns can be volatile due to equity components. Based on the market condition dividends are not guaranteed and can be given only from the profits not from the original capital.

Q:

What are the limiting factors of monthly income plan in mutual fund?

Ans:

The monthly income plan do not offer any fixed return. However, the investors can remove this drawback by option systematic withdrawal plan under MIP. The returns on MIP are volatile and sometimes it may or may not pay dividend at all. Monthly income plan includes high risk appetite as 30% of investment is made in equity.

Q:

What are the Major Highlights of Monthly Income Plan?

Ans:

 Some of the salient features of monthly income plans are:-

  1. Dividends can only be declared from the profits earned by MIP and not from the capital.
  2. Monthly income plan does not guarantee regular income
  3. According to the interest rates and stock market the return of monthly income plan is influenced.
  4. Because of lucrative commission structure, MIP’s are likely to mis-selling.
Q:

What are the documents required to open a Monthly Income Plan's account?

Ans:

The applicant will be required to submit the PAN card as identity proof, a cancelled check and an address proof along with the KYC application form in order to open a MIP account.

Q:

What are the best performing Monthly Income Plans in market?

Ans:

Some of the best performing MIP’s are:-

  1. Reliance MIP
  2. HDFC LT MIP
  3. BSL MIP II Saving 5
  4. Canara Robeco MIP

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