India Markets open in 1 hr 7 mins

Top 5 Ways to Invest for Generating Regular Income in India

Vipul Das

Would you like to generate regular income by investing in some financial asset with a small amount of lump sum? It can be related to any cause such as unemployment, poor job/business income or simply wanting to have your own income streams. In this article, we'll discuss the 5 different ways to generate regular revenue across the country.

Invest in Post Office Monthly Income Scheme

To save our money or produce monthly income, we also search for fixed deposits and other funding alternatives. But the post office's monthly income program provides various alternatives. Post Office Monthly Income Scheme offers you a fixed return on your investment. The scheme offers 7.6% of interest on your investment which is payable on a monthly basis. There is no tax exemption for the amount you spend in this, and interest income is taxable and no TDS is charged in this scheme. The scheme has a maturity of 6 years and you may deposit the money with cash, demand draft or cheque through the POMIS. When you open a monthly income scheme account, a scheme certificate and a passbook will be provided to track the purchases against the scheme.

There is a limitation on the investment for a single account to Rs 4.5 lacs and a joint account to 9 lacs. The best part of the scheme is after the maturity you may keep the money in the account, but then it would just receive the interest equivalent to saving bank account for the next 2 years. Although POMIS has a maturity period of 6 years, there is a facility to break it and take out your earnings after 1 year with a penalty of 2% if you withdraw within 1-3 years and 1% if you do the same after 3 years. Both Non-Resident Indian / HUF cannot are eligible for the scheme and a minor over 10 years of age can open an account directly. You can start investing with just a minimum amount of Rs 1500 and you can transfer your account to any post office in India without any charge.

Buy Annuity Plans

A pension plan is a form of investment that you can make use to generate income after your retirement. You have to invest some of your savings over a period of time to get regular income. Pension plans usually come in many forms, which provide insurers adjustable coverage based on their needs. Depending on your risk appetite, investors can choose between unit-linked retirement plans or endowment plans. You can also choose between a single premium pension plan and a regular premium pension plan as per your criteria.

You can also pay a single lump sum premium amount and earn regular returns from the investment. One can start investing at the age of 40 which is a good option for your early retirement. Pursuant to Section 80CCC of the Income Tax Act, 1961, you can enjoy tax benefits against your pension fund. Apart from this, you can get an interest rate up to 7.50% varies on the plan or the company with an assured regular income for your retired life. Pension plans are classified into 7 categories and with its unique features.

  • Life Annuity Plans
  • Deferred Annuity Plan
  • Immediate Annuity Plans
  • Unit Linked Pension Plans
  • Guaranteed Period Annuity Plans
  • With/Without Cover Pension Plans
  • Traditional Pension Plans

Some of the best 5 annuity plans in India for 2020 are:

  • LIC Jeevan Akshay 6 Plan
  • LIC Jeevan Nidhi Plan
  • SBI Life Saral Pension Plan
  • HDFC Life Click2Retire
  • HDFC Life Assured Pension Plan

Invest in Government Long Term Bonds

You can start investing in government bonds through NSE Mobile App. The app for investing in government bonds is NSE goBID which is a web bases platform too. You have to just complete the simple registration process to buy long term government bonds. One of the best advantages of investing in government bonds is that it generates regular income for your investments and the interest generated is not liable to tax.

Most types of government bonds are listed on the stock exchange, which is known as the secondary market in India which means you can also sell those bonds to the interested buyers whenever you want. To get the fullest advantage is is better to hold the government bonds for the full tenure of 5, 10, 15, 20, or 30 years. Risk free is guaranteed as the bonds are issued by the central government in India and are regulated and managed by Reserve Bank of India (RBI). As it is long-term investment options one can get a payable interest rate up to 7.75% which is varies depending on the scheme you choose.
Below given are the 5 best AAA rating Government Long Term Bonds:

  • PFC Capital Gains Bonds
  • IRFC Capital Gain Bonds
  • REC Capital Gains Bonds
  • NHAI Capital Gains Bonds
  • 7.75% Savings (Taxable) Bonds, 2018

Invest in Monthly Income Plan Mutual Fund

A Monthly Income Plan (MIP) is a form of mutual fund plan that primarily invests in debt and equity securities with an objective to produce cash flows and retain money. MIP Mutual Fund seeks to provide a stable income in the form of dividend payments and interest payments. It is suitable for retired persons or senior citizens who do not have any other source of stable income. MIP frequently invest in lower-risk securities such as fixed income, common stocks and dividend stocks. Even this is a Monthly Income Plan there is no guarantee that you will generate a return on a monthly income basis for which you can see a fall in market downturns.

Apart from the risk part some of the best parts of the fund are that there is no upper limit on the investment for monthly income plan, there is no entry load or any processing fees, exit load is 1%, there is no lock-in period and provided high liquidity as compared to others. The fund manager choose the moderate risk companies and invest mostly in debt securities such as debentures, public securities, and corporate bonds. MIP can generate high returns up to 12% which is better than the returns of fixed deposits. MIPs are taxable, as a debt-oriented investment option Both short-term capital gains (STCG) and long-term capital gains (LTCG) taxation rules are applicable to MIPs. For example, where the unit is disposed of before 3 years, the short-term capital gains are added to its revenue and taxed under the tax bracket of the investor.

Invest in Real Estate

Buying and owning immovable property is an interesting investment strategy which can be both satisfying and profitable. As compared to the other investment strategy such as stocks, gold, bonds, government schemes, etc this is the most popular and profitable investment option in India. The 4 main strategies that investors can make money through real estate are:

  • Be a rental property landlord
  • Real estate trading
  • Real estate investment groups
  • Real estate investment trusts (REITs)

Real Estate investment can generate regular income while maximizing the capital available through leverage. In addition, many related investments are tax deductible and have a high risk of loss.
If real estate investors use their assets to produce rental income or to bid their time until the ideal sale time comes, it is possible to build up a strong investment program by investing a relatively small part of the total value of the property in advance. Currently across the country, the average yield per sqft is 3%, but there are some micro-markets where rental yields can rise to nearly 4.5%

About the Author

Vipul Das is writing finance related articles and content for last 1 year and has done BCA from Dr C.V Raman Uuniversity. He has a strong knowledge of market, finance, business and investments. You can get in touch with him via Facebook and Twitter.

Also Read:

5 Best Investment Options For Salaried Employees

Mutual Funds SIPs That You Can Start With For Just Rs. 100

IndusInd Bank Slips 3% After Moody's Revises Outlook To Negative