A fixed monthly income is preferred by most individuals especially who are close to retirement or who have already retired. Senior citizens or individuals without a stable source of employment prefer this because they want a fixed source of stable income which is also safe. Monthly income schemes (MIS) vary from extremely secure options to slight risky options such as from bank FDs, Post Office deposits to mutual fund Systematic Withdrawal Plan (SWP). Senior citizens are also eligible for certain government-backed MIS options that provide comparatively higher interest rates and are also secure. Depending on your goals and risk appetite, you should choose between the various options available.
Here are some of the investment options offering steady monthly income;
Fixed Deposits MIS
Fixed Deposit (FD) monthly income schemes offer a regular fixed income with guaranteed returns at a certain rate of interest every month. Depending on the scheme and banks, the duration of Fixed Deposits MIS goes up to 10 years. The interest in this scheme is normally paid at a discounted rate for monthly payout FDs. Hence, you can opt for this option if want to earn guaranteed returns at a certain rate of interest every month, and withdrawals can also be made (the invested amount) before maturity.
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Mutual fund SWP
Similar to other MIS schemes, through systematic withdrawal plans (SWP) investors can also earn a regular income from their investment in mutual funds. While starting your investment, you can specify a certain fixed monthly payout which is paid on the designated date by redeeming units of the funds. These schemes come with both regular and dividend options. The dividend payout, however, is not guaranteed as it depends on the fund performance and market movements.
Apart from equity schemes, there is also the option of opting for debt schemes. The short-term gains of debt mutual fund investments are taxed according to the investor’s tax slab if the investments are redeemed before 3 years.
Post Office MIS
Post Office MIS is one of the most secure investment avenues, backed by the Central government. This scheme comes with a maturity period of 5 years and can be opened by either an individual or 2-3 people with an equal share of investment. If you hold a single account you can make an investment between Rs 1,500 to Rs 4.5 lakh, and with a joint account up to Rs 9 lakh. Currently, post office MIS offers interest 7.6 per cent on investments. Starting from the date of deposit, the interest is payable monthly.
Post Office Senior Citizen Savings Scheme (SCSS)
Individuals who have attained the age of 60 years, or who have attained 55 years of age but are less than 60 years, can open the Post Office SCSS account, subject to that one is retiring on superannuation or under any Voluntary Retirement Scheme (VRS). Currently, the interest rate offered on SCSS is 8.9 per cent per annum. This scheme comes with a maturity period of 5 years which can be extended for a further 3 years within 1 year of maturity. The interest is payable quarterly at the end of each quarter. You can make an investment between Rs 1,o00 to a maximum of Rs 15 lakhs. Even though the deposits made in the SCSS scheme are exempt from income tax under Section 80C of the Income Tax Act, 1961, the interest earned on the deposit is not exempted from income tax.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY offers senior citizens social security along with a stable income which is not affected by the change in interest rates. For PMVVY there is no maximum age limit set for senior citizens. This scheme offers a rate of return ranging from 8 - 8.30 per cent per annum. You can also opt for this scheme by paying a lump sum amount ranging from Rs 1.5 lakh to a maximum of Rs. 7.5 lakh for monthly pension. This scheme also offers pension payment and death payment along with maturity benefits.