Creating a steady cash flow is crucial to achieving financial stability and peace of mind. There are various investment options available in India that offer monthly income schemes, which can provide a steady stream of income on your investments. In this article, we will explore monthly income schemes as a means of creating a steady cash flow and achieving financial stability.
Monthly Income Schemes
Monthly income schemes are investment options that provide a monthly payout to investors. They are typically offered by banks, post offices, and mutual fund companies. Monthly income schemes are ideal for investors looking for a regular income stream and those who do not want to take on the risks associated with equity investments.
Here are some types of monthly income schemes available in India:
Fixed Deposit Monthly Income Scheme (FD MIS)
FD MIS is a fixed deposit scheme offered by banks and post offices that provide a fixed interest rate on the invested amount. Interest is paid out on a monthly basis, which makes it an ideal scheme for those looking for a steady income flow.
The interest rate for FD MISs is generally higher than regular savings accounts, but it also comes with a lock-in period. The tenure of these schemes can range from 1 year to 10 years, and investors can choose the option they desire best.
Mutual Fund Monthly Income Scheme (MIS)
MIS is a mutual fund scheme that invests in debt instruments such as bonds, money market instruments, and fixed income securities. It provides a regular income stream to investors in the form of dividends, which are paid out monthly, quarterly, or annually.
MIS can invest a maximum of 25% of its portfolio in equity instruments and has a lock-in period of one year. The returns on MIS are tax-free, making it an attractive proposition for investors looking for tax savings.
Annuity plans
An annuity is a contract between an investor and an insurer. The investor makes a lump sum payment to the insurer, and in return, the insurer provides regular payouts to the investor for a specified period or a lifetime.
Annuity plans are ideal for retirees who need regular income post-retirement. The payouts can be in the form of monthly, quarterly, or yearly payments. The amount of payout is determined based on the amount invested, age, gender, and other factors.
Post office Monthly Income Scheme (POMIS).
POMIS is an investment scheme offered by the Post office, which provides a fixed monthly income to investors. The interest rate for this scheme is also higher than regular savings accounts, and there is no maximum limit on the amount that can be invested.
The tenure of POMIS is five years, and interest payouts are made every month. The scheme provides guaranteed returns and is ideal for risk-averse investors looking for a secure investment option through the power of compounding .
Benefits of Monthly Income Schemes
Regular income
Monthly income schemes provide a regular income stream to investors. The payouts can be used to support day-to-day expenses or supplement an existing source of income.
Safe and secure
Monthly income schemes offered by banks and post offices are safe and secure as they are backed by the Government of India. Mutual fund schemes are also regulated by the securities and exchange Board of India (SEBI) and provide a safe investment option.
Tax benefits
Some monthly income schemes such as MIS and annuity plans provide tax benefits to investors. In the case of annuity plans, the amount invested is eligible for tax deduction under Section 80C of the Income Tax Act, 1961.
Diversification
Monthly income schemes offer an opportunity for diversification as it can be included as a part of the investment portfolio, along with equity, debt, and other investment instruments.
Conclusion
Monthly income schemes provide a reliable and stable income stream to investors and can be an effective tool in achieving financial stability. They offer a safe and secure investment option and can be considered as an alternative to equity investments or other high-risk investment options.
Investors should research and compare different monthly income schemes before investing to make informed decisions. It is essential to look at the interest rates, lock-in period, and investment risks ensuring the scheme align with your investment goals.
Creating a steady cash flow through monthly income schemes can provide financial stability and peace of mind to individuals. By investing in a diverse range of income-generating instruments such as FD MIS, POMIS, MIS or annuity plans, investors can achieve financial stability and build long-term wealth.
