Who doesn’t dream of earning a steady income without worrying about monthly expenses? Whether you’re planning for retirement, looking for extra income, or simply want to secure your financial future, monthly income schemes can be a smart choice. These plans are designed to provide you with a regular income, ensuring financial stability and peace of mind.
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Let’s explore 4 monthly income schemes that can help you achieve financial independence while keeping your investments safe and rewarding.
What is a Monthly Income Scheme?
A Monthly Income Scheme (MIS) is an investment plan designed to provide a steady stream of income after a specified period. In this scheme, you invest a fixed sum regularly over a set tenure. During the investment phase, the money accumulates and grows with interest or returns, depending on the plan. Once the scheme matures, you start receiving the accumulated amount as fixed monthly payouts for a predetermined period.
MIS serves as a reliable financial tool for individuals seeking long-term financial stability. By systematically investing smaller amounts over time, it allows your savings to grow while ensuring a regular income in the future. This makes it an excellent option for retirees, salaried professionals, or anyone planning for a stable post-investment income.
Example of a Monthly Income Scheme
Suppose you invest ₹10,000 every month in a Monthly Income Scheme for 10 years. By the end of the tenure, your total investment has grown with interest to ₹15,00,000.
Now, instead of receiving the full amount at once, the scheme starts paying you a fixed monthly income. Assuming a return of 7% annually, the payout will be:
- Annual Return: 7% of ₹15,00,000 = ₹1,05,000
- Monthly Income: ₹1,05,000 ÷ 12 = ₹8,750
Why Invest in Monthly Income Schemes?
- Steady Source of Income: The Monthly Income Scheme provides a fixed monthly payout after maturity, ensuring a reliable income stream for a predetermined period.
- Disciplined Savings: By investing a fixed amount regularly over a specified tenure, MIS encourages consistent and systematic saving habits.
- Low-Risk Investment: It is a safe investment option, ideal for risk-averse investors, retirees, or those seeking stable returns without market-linked risks.
- Capital Preservation: The principal amount remains secure throughout the tenure, and only the interest or returns are paid as monthly income.
- Consistent and Predictable Returns: The returns are not affected by market fluctuations, making it a dependable financial option for long-term goals.
- Supplementary Income: The monthly payouts can help meet regular financial needs, such as daily expenses, utility bills, or rent, offering additional financial support.
- Flexible Tenure: MIS offers various tenure options, allowing you to choose a plan that aligns with your financial goals and needs.
- Easy to Access: Offered by banks, post offices, and financial institutions, MIS requires minimal paperwork and is simple to set up.
Types of Best Monthly Income Schemes
Listed below are some of the top Monthly Income Schemes available that you can opt for along with their respective features:
| Features | Post Office Monthly Income Scheme (POMIS) | Fixed Deposit for Monthly Payout (FD) | Senior Citizens Savings Scheme (SCSS) | Bank Monthly Income Scheme (MIS) |
|---|---|---|---|---|
| Eligibility | All Indian citizens are eligible | Open to all citizens of India | Citizens aged 60 and above | Open to all citizens of India |
| Interest Rate | Comes with an annual interest rate of 7.40% from 1st July 2023 | Varies by bank | Fixed, typically higher than regular FD | Guarantees return to investors at an annual interest rate of 6.60% |
| Interest Payout | Monthly | Monthly | Quarterly | Monthly |
| Investment Limit | Min: Rs. 1,000Max: Rs. 4.5 lakhs (single account), Rs. 9 lakhs (joint account) | Min: Varies by bankMax: No limit | Min: Rs. 1,000Max: Rs. 15 lakhs | Min: Varies by bankMax: No limit |
| Risk Involved | Low risk, backed by the government | Low risk | Safe Investment Option, backed by the Indian Government | Low risk |
Documents Required for Applying to the Monthly Income Scheme
| Document Type | Documents Required |
|---|---|
| Proof of Identity | PAN Card, Aadhaar Card, Voter ID Card, Passport, Driver’s License |
| Proof of Address | Latest Utility Bill (electricity, water, telephone), Bank Passbook, Aadhaar Card (with address section), Voter ID Card, Rent Agreement |
| Additional Documents | Nominee’s KYC documents (Proof of identity and address) |
| Minimum Investment | ₹1,000 to ₹9 lakh, depending on the scheme and account type |
How is a Monthly Income Scheme Different from Recurring Deposits?
| Aspect | Monthly Income Scheme (MIS) | Recurring Deposits (RD) |
|---|---|---|
| Investment | Minimum amount required- INR 1500Maximum investment limit- 4.5 Lakh in single account; 9 lakh in joint account | Minimum amount- INR 10 per month.No maximum limit |
| Interest Rate | Interest rate of 7.7%, payable monthly | Interest rate of 7.3%, payable quarterly |
| Maturity | Maturity period is 5 years | Maturity period is 5 years but can be continued for another 5 years on year to year basis |
| Premature Withdrawal | Can be prematurely withdrawn after one year. If encashed before 3 years, deduction of 2%, if after 3 years, then 1% deducted. | Withdrawal upto 50% is allowed after 1 year. Should be paid in lump-sum with interest at prescribed rate. |
How to Choose the Best Monthly Income Scheme for You?
- Interest Rates: Compare interest rates across banks or financial institutions, as higher rates often lead to better returns, helping you achieve your financial goals effectively.
- Investment Amount: Review the minimum and maximum investment limits. Ensure they match your financial capacity and investment objectives.
- Tenure Flexibility: Choose a tenure that aligns with your financial goals and liquidity needs, providing both income and access when necessary.
- Tax Implications: Understand the tax obligations on interest earned, as it is taxed according to your income tax slab, which could affect your net returns.
- Bank-Specific Requirements: Verify any specific application requirements from your preferred bank to avoid delays or unexpected conditions.
- Professional Guidance: Consult a financial advisor if needed to evaluate your risk tolerance, investment horizon, and financial position and ensure the chosen MIS aligns with your overall financial plan.
In conclusion, a Monthly Income Scheme (MIS) provides a dependable solution for generating steady income while safeguarding your capital. It’s a valuable option for those with short-term financial needs as well as those seeking long-term financial security. Whether you’re preparing for retirement, enhancing your income, or aiming to grow your savings gradually, there’s an MIS designed to meet your financial aspirations. Make an informed choice, and take the first step toward consistent and reliable financial growth today!
Disclaimer: Nothing on this blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction, or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommend you seek professional advice from someone who is authorised to provide investment advice.
