For the individuals, who are retired as well as semi retired, earning a monthly income is one of the priorities. In order to generate the fixed income, it is recommended to have a mix of different investment options like FDs, mutual funds, Savings Schemes, Post office monthly savings scheme, etc. depending of the risk appetite of the individuals. Also, there are some limits in various instruments on the total amount that can be invested.
In this article we will discuss some of the key investment instruments, which are favourable for gaining a fixed monthly income.
Bank FDs or the Bank Fixed Deposits
One of the most popular instruments, when it comes to gaining the fixed income is fixed deposits or the bank FDs. This instrument of investment is safe as well as guarantees a fixed income in the form of interest. The income from the Bank FDs is simply earned as interest and the taxed according to the regular income slab of the person. In case the income in the form of interest exceeds Rs 10000 a TDS of 10 % is applied to it. There are banks, which are offering the fixed deposits, with a maturity of about 10 years.
Mutual Fund Investments
There are many people, who take the dividends from the mutual funds as the source of regular income. There are many debt funds, which are having an option of monthly dividends. But it should be kept in mind that dividends are not always guaranteed. The dividends are distributed from the gains, which are linked to the market performance.
There are also SWPs or the systematic withdrawal plans, which are better that the dividend option. In the systematic withdrawal plans, a specific amount is specified, which gets paid at the end of every month. For example, one investor is investing about 15 Lakhs in mutual funds and has mentioned that he needs 15 thousand every month.
These investments in the debt funds are taken as long term in case they are held for more than 3 years. The capital gain on the long term debt funds are taxed at the rate of 20 %. The benefit of indexation of the original investment is provided in this option. The original investment is adjusted based on the inflation rate. It is also taxed on the basis of inflation rate.
Monthly Income from Post office Scheme
Under the post office scheme, a fixed interest is paid on the monthly basis and starting from the date of deposit. Any person who will open the post office monthly income scheme will get an annual interest rate of 7.3 %, which will be payable monthly. There is a provision, under which the people can have multiple accounts. However, there is an upper limit on the amount invested in each account. In the single accounts the amount invested should be lower than 4.5 Lakhs. In case of joint account the upper limit is of 9 Lakhs. The maturity period of these accounts is 5 years.
Pradhan Mantri -“Vaya Vandana Yojana” PMVVY
This is the government scheme for senior citizens, which was launched in May, 2017. This scheme is operated by Life Insurance Corporation of India. A fixed interest of 8% is guaranteed to the senior citizens for a period of 10 years. The pension is also paid to the senior citizen based on the frequency option selected by the policyholder.
An investment of 1.5 Lakhs will earn a pension of 1000 INR per month. The maximum amount which can be invested is 7.5 Lakhs and a pension of 5000 INR is earned in this case.
Senior Citizen Savings Scheme
This is the scheme for the senior citizens. An individual with an age of more than 60 years can open this account. An interest rate of about 8.3 percent is offered in this scheme. The maturity period of this scheme is five years. The person can open one or more account in this option. The person can also open a joint account in the name of the person as well as the spouse.
Thus, we have seen the key investment options, which can be opted for earning a fixed and guaranteed income.