10 Best Monthly Income Investment Plans in India

One can have different reasons for investing. While some invest to grow their wealth over a long period, some invest for short-term returns, yet others invest to earn a steady monthly return on investment, growing their wealth.

You may want to achieve an early retirement or become financially independent. 

Being financially independent means being able to sustain your lifestyle without having to work actively to earn money. You should have enough passive income or accumulated wealth to be able to sustain your life to a desired standard. Investing to earn a fixed monthly income is a way to ensure both value appreciation and fixed passive income.

In this article, we will cover how you can invest to earn a monthly income in India. Here, we will look at the best monthly investment schemes and analyze the options with what they have to offer.

Why do you need a monthly income plan?

One of the key aspects of effective financial planning is to answer the why. A monthly investment plan can be desirable for multiple reasons. 

First, you may want to earn an extra income over and above your regular income. Second, you may want to build a passive stream of income, and eventually retire. Third, you may want to have an investment plan that not only grows your money over time but gives you fixed returns periodically. 

Whatever the reason may be, investing to earn a fixed monthly income is an effective way to attain financial freedom in the long run.

Numerous monthly investment schemes are available in India. As an investor, it is essential to critically analyze your options and choose the ones that suit your financial goals and aspirations. 

In the next section, we will cover the factors you should consider before investing in monthly income. 

Factors to Consider While Searching for Best Investment Plan for Monthly Income 

Before you start investing to generate monthly income, you must consider these factors - 

• Your Financial Goals

When one is searching for an investment option to generate monthly income, it is important to see if the scheme meets your financial goals. For this, you should list all your long-term and short-term goals and use this list to define your monthly expenses and help you select the right monthly income scheme. 

• Risks You Can Afford to Take 

All your monthly investment schemes should be selected based on the risks you are willing to take. This can be easily done by weighing the pros and cons of every scheme you are considering investing in. 

• Liquidity 

To select the best monthly income-generating investment scheme, it is vital that you understand the concept of liquidity. Liquidity is the ease with which an asset can be converted into cash without changing the market price. Your investment portfolio must include sufficient assets can can be easily liquidated in case of any requirement. 

10+ Best Monthly Income Scheme in India

1. Equity Share Dividends (Best Investment Plan For Monthly Income)

Let’s start the list with the most popular monthly investment option on our list - Equity Share Dividends. 

Investing in the stock market primarily gives you returns in two ways - capital appreciation as the stock price goes up over time, and dividend payout that gives you periodic returns from your stock portfolio.

Tip: Dividend investing is a strategy that involves investing in companies with a history of high dividend payouts. 

Often high dividend-paying companies do not perform well in terms of capital appreciation, as a result, the best way for you would be to invest in stocks that have a promising growth prospect while having a history of high dividend payouts if you wish to benefit from both.

Motley Fool suggests that dividend stocks have historically outperformed the S&P 500 with less volatility. 

This is because, over time, asset appreciation and dividend payments add up to a higher total return. Dividend yields differ for different companies and depend on the company's plans and financial decisions.

Key Features of Equity Share Dividends

✅ Investors holding equity shares become part owners of the company

✅ Companies declare dividends regularly (monthly, quarterly, or annually)

✅ Along with monthly income, equity share dividend investment also offers the opportunity for capital appreciation as the value of the share increases.

✅By investing in multiple companies, you can take advantage of diversification.

2. Long-term Bonds

Investing in long-term fixed-income assets like government bonds is one of the best monthly investment schemes. These Government bonds are issued by the government and it is a means to raise funds for infrastructure development projects or other expenditures. 

These Bonds are issued with a fixed interest rate and maturity period that can range from a few months to several years.

Apart from receiving the Bond's principal amount on maturity, it also offers monthly returns. India’s average long-term government bonds offer an interest rate of 7.05% as of August 2023, you can keep track of the changing rates here.

3. Peer-to-Peer Lending

Peer-to-peer lending or P2P lending is an alternative investment that has recently gained traction in India. As per a report by PricewaterhouseCoopers or PwC, India’s P2P lending market is expected to reach USD 4 billion by 2026. 

A report by IndustryARC predicts an even higher market size of USD 10.5 billion by 2026, growing at a CAGR of 21.6% during 2021-2026.

As an investor, you can invest in P2P lending plans and become a lender. Lenders earn recurring interest income on their loans, while the principal is retrieved on the maturity of the loan period.

You can read about IndiaP2P’s investment plan for monthly income here, and you can also check out the monthly income plan offered by the platform which gives a 16% p.a. interest rate with monthly interest payments for as little as INR 10000 invested.

4. Corporate Deposits (Best Investment Plan for Monthly Income)

Corporate deposits are also called corporate fixed deposits. Just like fixed deposits offered by banks, these instruments are offered by trusted corporations with a fixed rate of interest for a fixed tenure. 

The interest rate offered is usually higher than regular bank FDs. Corporate deposits are often offered by NBFCs and housing finance businesses. The risk associated is usually higher than that with bank FDs.

5. Monthly Income Plans 

Investing in Monthly Income Plans or MIPs is a strategy of mutual fund investing. These funds invest heavily in fixed-income instruments along with a bunch of equity instruments. 

These funds pay out regular returns to their investors, however, these regular payments are not fixed and vary as per the performance of the plan’s underlying assets. 

Considering the risk, it becomes essential to choose the plans strategically keeping your risk appetite in mind.

6. Post Office Monthly Income Scheme 

If you are a risk-averse investor, the government-backed Post Office Monthly Income Scheme (POMIS) offered by India Post can be a good monthly income investment option for you. The scheme pays our fixed monthly interests over a fixed tenure. 

The minimum investment requirement is INR 1500, and the maximum tenure offered is 5 years, after which you can reinvest in the scheme. The interest rate offered is revised on a quarterly basis and for the July-September quarter of FY-2023, it has been kept at 7.4% p.a.

7. Systematic Withdrawal Plans (Good Monthly Investment Schemes)

While a Systematic Investment Plan or SIP is a way to stagger your investments on a regular basis, Systematic Withdrawal Plans or SWPs allow investors to withdraw fixed amounts at regular intervals. 

These plans are offered by fund houses wherein you can get fixed monthly returns from your mutual fund investments.

8. Annuity Plans

Annuity plans can be a great way of earning a fixed monthly income after you retire. These are offered by insurance companies that invest your money over a period and pay back the returns. 

These plans offer regular fixed returns in exchange for lump sum investments made earlier. You can either opt for an immediate annuity or a deferred annuity. 

The former offers returns soon after you make your one-time lump sum investment, while the latter starts paying out after a specified period.

Key Features of Annuity Plans (A Good Monthly Investment Scheme) 

✅ Regular monthly income guaranteed

✅ Flexibility in payout options. You can choose from options such as lifetime, joint-life, or fixed-term annuity

✅ Customizable payout period. You can select the desired payout period ranging from a few years to an entire lifetime

✅ It is eligible for tax benefits under Section 80CCC of the Income Tax Act, 1961. 

9. Pradhan Mantri Vaya Vandana Yojana (best monthly income scheme)

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a Pension Scheme exclusively offered to senior citizens aged 60 years and above. This scheme offers you a fixed income once you retire. 

The maximum investment amount is INR 15 lakhs per senior citizen. The PMVVY scheme provides investors with an assured return at the rate of 7% to 9% for 10 years.

10. Lease Financing 

Lease financing is yet another alternative investment option on this list that can offer you a monthly income. Lease financing offers regular fixed monthly income in return for leased-out properties or equipment. 

You can specify the terms of payments in your lease contract. Usually, lease financing is backed by collateral and hence it is largely considered as a safe investment.

11. Life Insurance Plus Saving

Another monthly investment scheme that offers good returns is a life insurance policy. These are the life insurance plans that provide an option of receiving a predetermined monthly payout on maturity. When you combine life insurance with savings, you can secure your financial stability. 

12. Senior Citizen Monthly Saving Scheme 

The Senior Citizen Saving Scheme (SCSS) is one of the government-backed monthly income plans that is designed specifically for senior citizens (60 + years). The highlight of this monthly saving scheme is that it offers high returns. 

Key features of senior citizen monthly saving scheme 

✅ Under SCSS there is a limit of investment to Rs. 30 Lakhs

✅ Get advantage of 8.2% p.a. Interest

✅ The tenure of the SCSS monthly investment scheme is fixed for 5 years

✅ Premature withdrawal is allowed after 1 year (subject to certain penalties)

✅ The interest earned by SCSS is taxable as per your income tax slab

✅ Low risk 

Conclusion

Investing to earn a monthly income is a good way of building a passive income stream. Several monthly investment schemes offer a fixed monthly income as dividends, interest payments, or rental income. 

In this article, we have covered the best investments for monthly income in India including traditional options as well as alternatives. 

All the investments have varying degrees of risk and rewards to offer. As an investor, you need to analyze the options you have and choose as per your risk appetite and financial goals. Diversification becomes all the more important considering the risks involved.