Factors to Consider for Rs. 25 Lac Monthly Investment Income:
The primary objective of the investment is earning returns on it with lower risk. Therefore, wherever you invest, the important consideration that solves the issue is what amount or percentage returns you want to earn over the chosen tenure.
However, monthly income is an altogether different objective than the long-term perspective. Therefore, the factors to consider for monthly income investments are:
Banks and post offices are the safest investment organizations in the Indian context. It is not only their penetration across the country, but your deposits enjoy DICGC cover besides functioning under strict RBI regulation.
Investors with a low-risk profile look for options where the returns are guaranteed rather than depend on market volatility.
While investing your Rs.25 Lac disposable income, you must carefully choose the tenor and the scheme. The monthly income should continue for the varying period and should offer a premature withdrawal facility for liquidity.
Investors should also look at the tax liabilities arising from the monthly income on Rs.25 Lac investment. For example, senior citizens earn an exemption of Rs.50000 annually on interest income. On the other hand, Mutual Fund returns are liable for taxation under capital gains, as per norms.
Investment Options for Monthly Income Rs.25 Lakhs:
Having understood the factors influencing the decision to invest Rs.25 Lac and earn monthly returns, let us now explore the schemes open to you.
All banks offer a monthly income scheme for periods ranging from 1 year to 10 years with varying interest rates. Since banks apply compounded interest quarterly, the monthly interest paid is discounted. However, you enjoy various upsides like flexible tenors, joint account operation, nominee facility, loans, and above all, liquidity through premature closure without penalty.
Like the bank, corporate deposits offer a higher interest rate that translates to higher monthly income. However, you need to deal with the possible higher risk to your investments than banks.
Therefore, it is your assessment and responsiblity to choose corporate houses offering deposits, be it Non-banking Financial Companies (NBFC), Housing Finance Companies (HFC), or other companies. A “AAA” CRISIL or ICRA rating signifies high credibility and stability. Though not strictly in the monthly income genre, as the income is paid quarterly or half-yearly, you can distribute the total investment across companies to satisfy the monthly income norm.
Monthly Income Plan Mutual Funds:
Mutual Fund investments have come out as the favorite financial isntruments for investors looking to maximize returns through market. The investment suits the risk-averse retirees and conventional investors alike for the higher returns essentially from hybrid funds. These funds attract nearly 70 to 80% of allocated assets in debt funds while the rest is in equities delivering consistent returns.
On the other hand, hybrid balanced funds distribute nearly 65% of the corpus in equities and the remaining in debt funds. You can choose from the annual or monthly dividend options. Some of the top dividend-paying balanced funds have yielded 10% or more returns over many years.
The cardinal point is that mutual funds are not guaranteed in amount or timing. Dividends are disbursed out of the profits like any market-linked instrument. Here you must consider the Systematic Withdrawal Plan (SWP) in Mutual Funds, specifying a fixed monthly amount. Thus, you enjoy the benefit of a fixed monthly withdrawal and stay invested simultaneously.
Other Monthly Income Options:
you can still explore a few more schemes providing the option for periodic disbursement of the accrued interest.
Post Office Monthly Income Scheme:
The scheme offers a fixed 5-year tenure and currently, it is paying 6.6% interest per annum and disbursed monthly. Accordingly, you earn Rs.55 every month on an Rs.10000 deposit. In addition, you can open an account for single or joint operations. However, you can invest in multiples of Rs.1000 limited to a maximum of Rs.4.5 Lac singly and Rs.9 Lac jointly. The best part is that your investment is 100% safe as it carries a sovereign guarantee.
Senior Citizens Savings Scheme:
A government-sponsored low-risk scheme tailored for senior citizen retirees to fulfill their social obligations. You can invest up to Rs.15 Lac for a 5-year tenure in all the post offices and designated banks across the country. The scheme enjoys a sovereign guarantee, currently paying 7.4% interest disbursed quarterly.
Though the scheme has a fixed tenure, you can extend it for another 3 years from the maturity date. Premature closure is allowed subject to complying with the underlying conditions. However, no conditions apply for deposits withdrawn prematurely after one year during the extended tenure.
Government Bonds are also called G-Secs, Government Securities for short. They are long-term investment schemes which help the central and state government raise funds to meet infrastructure development expenses. These bonds are essentially long-term debt instruments issued for tenures from 5 to 40 years with a fixed maturity date.
However, the investment is ideally suited for low-risk investors earning a fixed coupon rate, as the interest is called, higher than offered in banks or the post office fixed deposit schemes. Moreover, RBI has stipulated half-yearly interest disbursement to satisfy your requirement of earning periodic returns.
The RBI has also opened the Indian bonds market to retail investors from November 2021, making investments in the scheme attractive. In addition, there is no monetary ceiling for investments in G-Secs.
Why Invest in Monthly Income Scheme?
Retirees and homemakers are the major investors in monthly income schemes that lend stability and financial independence through a steady monthly income. But, choosing the right investment vehicle depends mainly on your investment goals. Therefore, while considering the various impacting factors, the monthly investment portfolio must also deliver the following:
Augment Regular Income Flow: Provide stability through a regular income stream and financial independence to individuals with limited resources like retirees. In addition, the lump sum Rs.25 Lac investment is a security shield to meet financial emergencies apart from supplementing regular expenses.
Tax Benefits: While interest earning from Bank deposits and Senior Citizens Savings Scheme (SCSS) is free from TDS up to Rs.50000 for senior citizens, others enjoy similar benefits up to Rs.40000. Moreover, Investments in SCSS and G-Sec are tax-exempt up to a maximum of Rs.1.5 Lac under Section 80C of the Income Tax Act, 1961. However, other investment schemes offer no such benefit. (*Tax benefit is subject to changes in tax laws. Standard T&C apply.)
There are MULTIPLE investment options for Rs.25 Lac for monthly income.But, careful analysis about the return on investment and individuals objectives are major drivers of the options. Bank or corporate deposits for a guaranteed fixed monthly income is ideal for risk-averse individuals. On the other hand, explore monthly income mutual fund plans to maximize returns without fixed income assurance from market-linked instruments. In either case, investors are ensured financial stability and independence.