6 investment schemes that provide you monthly income

Getting a monthly income regularly is a great relief to many as it ensures that we meet our daily expenses. An investment scheme providing monthly income gives us financial freedom as we don't have to rely on others for our monetary needs. To meet their money-related requirements, people invest in a number of market-linked and non-market-linked investment programmes, which help them get a regular income. Some of the popular schemes that provide monthly income are- Post Office Monthly Income Scheme (MIS), Senior Citizen Savings Scheme (SCSS), Atal Pension Yojana (APY), mutual fund systematic withdrawal plans (SWP), and mutual fund's Income Distribution cum Capital Withdrawal (IDCW) plans. In this write-up, learn more about these schemes and how you can generate a monthly income from each of them.

Post Office Monthly Income Scheme Account (MIS)

The guaranteed return scheme provides an annual interest rate of 7.4 per cent.

One can have an individual or a joint account under the scheme.

In an individual account, one can deposit a maximum of Rs 9 lakh, while in a joint account, the maximum limit is Rs 15 lakh.

In an individual account, you can get a maximum monthly pension of Rs 5,550 for five years, while, in a joint account with your spouse, you can get a maximum monthly pension of Rs 9,250. The account can be closed after 5 years.

Senior Citizens Savings Scheme Account (SCSS)

The scheme provides quarterly income to senior citizens.

On a one-time investment, they can get income for five years.

After five years, the SCSS account holder can extend their account for another three years.

Among all post office schemes, SCSS offers the joint highest interest rate of 8.2 per cent annually with Sukanya Samriddhi Yojana.

One can invest a maximum of Rs 30 lakh in the guaranteed return scheme.

On an investment of Rs 30 lakh, the maximum quarterly income will be Rs 61,500. In five years, the total interest earned on the investment will be Rs 12,30,000.

At the end of the scheme, one gets their invested amount back.

Atal Pension Yojana (APY)

This pension scheme is for workers in the unorganised sector.

Under APY, the government guarantees a minimum monthly pension of Rs 1,000, Rs 2,000, Rs 3000, Rs 4000, or Rs 5,000 per month at the age of 60 years based on the contributions of the subscribers.

Even if returns on an individual's contributions are not sufficient to provide them with a pension, the government chips in to guarantee them an income.

The scheme is an attractive pension tool for workers without any other source of income. 

To open an APY account, a person should be between 18 to 40 years old and have a savings bank account in a post office/savings bank.

Systematic Withdrawal Plan (SWP)

In a SWP plan in a mutual fund, you get a fixed income every month after making a one-time investment.

The mutual fund house sells net asset value (NAV) every month to match the prefixed withdrawal amount.

If the market is high and the NAV rate is high, the fund house sells fewer NAVs, but if the market is down and the NAV rate is also low, the fund house sells a higher number of NAVs.

If the rate of return is quite high compared to the rate of monthly withdrawal, a person can withdraw their pension for many decades, and their fund value will also keep growing in the long run.   

Income Distribution cum Capital Withdrawal (IDCW)

In an IDCW plan, investors receive regular income after making one-time investments.

IDCW allows investors to benefit from both income distribution and capital withdrawal.

Here, the fund house distributes profits among investors.

The amount one receives depends on the fund's NAV rate and the holding period of the account holder.

Investors can receive IDCW payments from a mutual fund’s NAV even if the fund does not make profits.

This is because IDCW payments encompass income and capital withdrawals, allowing investors to receive a consistent return on their investments.

This structure can be particularly appealing for those seeking a steady income stream without having to liquidate their holdings.

Annuity Plans

A lot of life insurance companies offer annuity plans where one receives a monthly pension after a one-time investment.

Policyholders get two options under annuity plans: immediate annuity and deferred annuity.

In immediate annuity plans, one gets immediate monthly income after making an investment, while in a deferred annuity, one starts receiving income after a fixed-tenor period specified by the policyholder.