Top Mutual Funds Schemes for Monthly Income in India

Monthly income mutual funds are open-ended mutual funds primarily invested in fixed-income instruments, making them one of the best investments for monthly income. These funds blend debt and equity funds, allocating over 65% to fixed-income instruments and the remainder to equity-linked instruments for market-linked returns. The main goal of these funds is to offer a steady income stream with monthly or quarterly payout options, making them the best investment plan for monthly income in India.

Investing in monthly income plans in India is straightforward—investors can buy and sell units like any other mutual fund through lump sum or systematic investment plans (SIP). This article will explore a list of the best monthly income investments, providing insights into their overviews, features, benefits, and how to get monthly income from investments in India.

List of Best Monthly Income Mutual Funds in India (2024)

Here is a list of the top monthly dividend income mutual funds in India for 2024:

Fund Name	Category	AUM (in Cr)	Expense Ratio (%)	Exit Load (%)	1Y Returns (%)
HDFC Defence Fund	Thematic Fund	3,996.82	0.72	1	73.98
LIC MF Infra Fund	Sectoral Fund - Infrastructure	786.09	1.38	1	65.59
Mirae Asset NYSE FANG+ETF FoF	FoFs (Overseas)	1,501.63	0.06	0.5	63.86
Motilal Oswal Midcap Fund	Mid Cap Fund	20,055.68	0.58	1	63.61
SBI PSU Fund	Thematic Fund	4,471.14	0.76	0.5	63.04
Bandhan Small Cap Fund	Small Cap Fund	8,716.22	0.36	1	62.62
Invesco India PSU Equity Fund	Thematic Fund	1,331.16	0.76	1	61.32
Bandhan Infrastructure Fund	Sectoral Fund - Infrastructure	1,776.78	0.81	0.5	60.57
ICICI Pru PSU Equity Fund	Thematic Fund	2,356.68	0.72	1	60.13
Canara Rob Infrastructure Fund	Sectoral Fund - Infrastructure	848.06	1	1	59.39

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data on the top monthly income mutual funds is from 12th November 2024. This data is derived from the Tickertape Mutual Funds Screener.

🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

Best Monthly Income Funds: An Overview 

Below is a brief overview of the best scheme for monthly income in India:

HDFC Defence Fund

Managed by HDFC Asset Management Company, a major player in India’s mutual fund industry, this fund is considered one of the best investment plans for monthly income in India. It leverages the expertise of a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments (SLI). With a CAGR of 71.24% over 1.45 years, the HDFC Defence Fund has quickly established itself as a high-growth option in the defence sector, contributing to a robust monthly income investment plan.

LIC MF Infra Fund

Established by LIC of India in 1989, LIC Mutual Fund brings a certain level of stability to investors seeking the best scheme for monthly income. Its Infrastructure Fund, with assets exceeding Rs. 14 crore, delivers a solid CAGR of 29.47%. This fund is ideal for those looking to invest in India’s expanding infrastructure sector and build a monthly income plan.

Mirae Asset NYSE FANG+ETF FoF

Operated by Mirae Asset Global Investments, a leader in Asia’s financial markets, this fund provides access to tech giants via the NYSE FANG+ index. With a CAGR of 25.75% over 3.5 years, the Mirae Asset NYSE FANG+ETF FoF offers a unique opportunity to tap into technology growth, positioning itself as one of the best investments for monthly income.

Motilal Oswal Midcap Fund

Motilal Oswal Asset Management Company Ltd. manages this midcap fund with expertise derived from Motilal Oswal Financial Services Limited (MOFSL). With an impressive CAGR of 33.33%, this fund suits investors looking for the best monthly income investment plans in India through exposure to the mid-cap segment.

SBI PSU Fund

Leveraging 30 years of fund management experience, SBI Funds Management Ltd. (SBIFML) strengthens its reputation with the SBI PSU Fund, a viable option for the best monthly income investments. As a joint venture with AMUNDI, one of the world’s top asset managers, the fund has delivered a dependable CAGR of 26.42%, making it one of the best investment plans for monthly income in India.

Bandhan Small Cap Fund

Launched in February 2020, this open-ended equity fund by Bandhan Mutual Fund targets the small-cap sector. With a CAGR of 40.61% over 4.72 years, it stands as a strong choice for those interested in monthly income investment plans focused on small-cap growth.

Invesco India PSU Equity Fund

This fund, managed by global investment leader Invesco, is renowned for its focused approach to PSU equities. With a CAGR of 29.29%, it offers a reliable monthly income plan, benefiting from Invesco’s extensive experience across 25 countries.

Bandhan Infrastructure Fund

Previously under IDFC Mutual Fund management, Bandhan Infrastructure Fund is an attractive option for those seeking monthly income investments in the infrastructure sector. Its 31.90% CAGR indicates strong performance, making it part of the best investment plan for monthly income in India.

ICICI Pru PSU Equity Fund

ICICI Prudential Asset Management Company Ltd., a leader in India’s AMC sector, offers this high-performing PSU equity fund in a joint venture with Prudential Plc. With an exceptional CAGR of 42.82% over 2.17 years, this fund is a compelling choice for monthly income plans in India.

Canara Rob Infrastructure Fund

Canara Robeco Asset Management Company Ltd., in partnership with Robeco Groep N.V., manages this infrastructure-focused fund. The fund’s strong CAGR of 30.71% makes it an appealing choice for those considering the best investment plan for monthly income in India’s growing infrastructure landscape.

What are Monthly Income Mutual Funds?

A monthly income mutual fund, also commonly known as monthly income plans (MIP), is one of the best monthly income schemes available for investors seeking steady returns. It is a type of mutual fund that invests primarily in debt and equity securities to preserve capital and ensure cash flow. These monthly investment plans are ideal for investors who are comfortable with a moderate risk factor and are looking for the best income plan to generate regularised income from their investments. The main objective of a monthly income mutual fund is to ensure a regularised stream of income in the form of dividends and interest payments. However, it is crucial to understand that a steady stream of income may not always be guaranteed, as it depends on the availability of surplus funds generated by the fund manager of the MIP.

Types of Monthly Income Plans

Monthly income mutual funds in India are among the best monthly income plans, allowing investors to earn regular income while aiming for capital appreciation. Here are the main types of MIPs available to investors:

• Equity-Oriented MIPs: These investment plans in India primarily invest in equities and fixed-income securities. They aim to generate higher returns by allocating a significant portion of the portfolio to equities while providing regular income through fixed-income instruments. This combination positions them as one of the best monthly income scheme for those looking for potential growth along with income.
• Debt-Oriented MIPs: These plans predominantly invest in fixed-income securities such as bonds, debentures, and government securities, making them a reliable monthly investment plan. By focusing on debt instruments, they provide stable income with lower risk while offering the potential for capital appreciation.
• Balanced MIPs: These best monthly income plans maintain a balanced allocation between equity and debt instruments. By diversifying across asset classes, they aim to generate returns while effectively managing risk, positioning themselves as an ideal option for an MIS investment.
• Dynamic MIPs: These monthly investment plans allow fund managers to adjust the allocation between equity and debt based on market conditions. This flexibility helps them capitalise on market opportunities and mitigate risks, ensuring an adaptable approach for the best income plan.
• Growth-Oriented MIPs: These plans focus more on capital appreciation over regular income. They primarily invest in equities and other growth-oriented assets to achieve long-term capital appreciation while providing minimal income distribution. This type of MIS investment may be suitable for those prioritising growth over a consistent income stream.

How do Monthly Income Mutual Funds Work?

Monthly income mutual funds operate by strategically investing in a mix of debt and equity securities to generate cash flows and preserve capital, making them a preferred monthly investment plan. These best monthly income schemes work by distributing income from dividends or interest earned on the underlying investments.

How do Monthly Payouts Occur?

In a monthly income plan (MIP), investors can receive payouts regularly through dividend options. This makes it an appealing MIS investment for those who wish to know how to get monthly income from investments. While many investors prefer the dividend plan of mutual funds for earning a steady income, it is essential to note that these dividends are not always consistent. Fund managers only declare dividends when there is a distributable surplus, which may or may not be regular. Dividends can be declared quarterly, half-yearly, annually, or not at all, depending on the fund’s performance. Therefore, relying solely on dividends as a monthly income plan is often discouraged by investment experts.

How to Use Systematic Withdrawal Plans (SWPs) to Generate Monthly Income?

An SWP is considered one of the best monthly income plans for a more dependable approach to earning regular income. A Systematic Withdrawal Plan (SWP) allows investors to withdraw a set amount regularly from their mutual fund investments, providing a structured and reliable way to generate income. Unlike SIPs, where you invest money in instalments into mutual funds, SWPs facilitate regular withdrawals to maintain cash flow.

With an SWP, investors can set up automatic monthly withdrawals to meet their income needs. For example, if you have invested Rs. 1,00,000 in a mutual fund and wish to withdraw Rs. 5000 every month as part of your MIS investment, you can schedule an SWP. This ensures a steady income flow and answers the question of how to get monthly income from investments. The mutual fund’s NAV (Net Asset Value) at the time of withdrawal determines the number of units redeemed.

• Calculate the Number of Units to Redeem: The AMC calculates the number of mutual fund units that must be redeemed monthly to withdraw Rs. 5,000.

Number of Units to Redeem = Withdrawal Amount / NAV

Number of Units to Redeem = Rs. 5,000 / Rs. 20 = 250 units

• Redemption Process: At the beginning of each month, the mutual fund will redeem 250 units from the investor’s holdings and credit Rs. 5,000 to the investor’s bank account.
• Adjusted NAV: The mutual fund’s NAV may change after the redemption. Let’s say the NAV after the first redemption is Rs. 22.
• Calculate the New Number of Units: For next month’s withdrawal, the investor needs to calculate the number of units to redeem at the updated NAV.

Number of Units to Redeem = Withdrawal Amount / NAV

Number of Units to Redeem = Rs. 5,000 / Rs. 22 = 227.27 units (rounded to the nearest whole unit)

• Redemption Process (Next Month): At the beginning of the second month, the mutual fund will redeem 227 units (rounded) from the investor’s holdings at the new NAV and credit Rs. 5,000 to the investor’s bank account.

This process continues monthly as long as the investor wants regular withdrawals.

Steps	Details
Initial Investment	Rs. 1,00,000
Monthly Withdrawal Amount	Rs. 5,000
Mutual Fund’s NAV	Rs. 20 per unit
Number of Units to Redeem (Month 1)	Withdrawal Amount / NAV = Rs. 5,000 / Rs. 20 = 250 units
Redemption Process (Month 1)	At the start of the month, the mutual fund will redeem 250 units and credit Rs. 5,000 to the investor’s bank account.
Adjusted NAV (After Month 1)	Rs. 22 per unit (example)
New Number of Units (Month 2)	Withdrawal Amount / NAV = Rs. 5,000 / Rs. 22 ≈ 227.27 units (rounded to nearest whole unit)
Redemption Process (Month 2)	At the start of the second month, the mutual fund will redeem approximately 227 units (rounded) at the updated NAV and credit Rs. 5,000 to the bank account.

Features of Monthly Income Mutual Funds 

Mutual fund monthly income plans present distinctive features. The best mutual fund for monthly income should offer a balance of growth potential and steady income, making it a preferred choice among monthly income mutual funds in India.

• Investment in Debt Instruments: Monthly income mutual funds allocate 70% to 80% of their portfolio to debt instruments like bonds, debentures, and money market instruments, with the remainder in equities. They offer two options: Dividend and Growth. The Dividend option provides periodic payouts, while the Growth option reinvests returns, reflected in the net asset value (NAV).
• Subject to Market Conditions:  It’s crucial to understand that mutual funds monthly income plans don’t guarantee fixed income, as dividends depend on the fund’s surplus and NAV performance. The income can vary based on market conditions and fund performance, which affects the reliability of any monthly income mutual fund scheme.
• Low-Moderate Risk Involved: Monthly income plan mutual funds suit investors with low to moderate risk tolerance and a medium to long-term investment horizon. These typically offer higher returns than fixed deposits and post office monthly income schemes but lower than pure equity funds, positioning them as balanced investment choices.

Benefits of Investing in Monthly Income Mutual Funds

Investing in the best mutual fund for monthly income offers a range of advantages for savvy investors. Here are some key benefits of a monthly income plan mutual fund:

1. Steady Income Streams: Monthly income mutual funds deliver reliable and regular income, providing stability for investors seeking consistent cash flow. A well-chosen mutual funds monthly income plan ensures that investors can rely on regular distributions.
2. Tailored to Retirement Needs: Monthly income mutual funds in India are particularly beneficial for retirees, offering a tailored solution to meet their income needs in retirement. This feature makes a monthly income mutual fund scheme an essential part of a retirement portfolio.
3. Diverse Equity Exposure: Monthly income plan mutual funds provide investors with the advantage of a diversified portfolio that includes varying equity exposures, catering to different risk appetites and preferences.
4. Professional Management: One of the benefits of investing in mutual funds monthly income plans is access to professional fund management. Investors leverage the expertise of professional fund managers, ensuring that investment decisions align with market dynamics and long-term financial goals.
5. Tax Benefits: Monthly income mutual funds can potentially offer tax benefits, particularly to investors in a higher tax bracket, as the tax on dividends can be limited. This aspect makes monthly income mutual funds in India an attractive option for those seeking tax efficiency.

What are the Returns on Monthly Income Mutual Funds, & How are they Calculated?

Calculating returns on a monthly income mutual fund scheme involves a straightforward process. These MIPs in mutual funds typically generate income through interest from the underlying investments.

The total return is the sum of these income distributions and any capital appreciation or depreciation. When investing in a mutual funds monthly income plan, investors should consider the fund’s expense ratio, which affects overall returns. This ratio includes management fees and operating costs, reducing the net return to investors.

It’s essential to review the historical performance of the best mutual fund for monthly income and understand the strategy fund managers employ in selecting income-generating securities. Regular monitoring ensures investors stay informed about potential changes in the fund’s performance and adapt their investment strategy accordingly.

How to Choose the Best Monthly Income Mutual Funds?

When selecting mutual funds monthly investments, consider your financial goals, risk tolerance, and investment horizon. Follow these steps to make informed decisions:

1. Define Your Objectives: Clearly outline your financial objectives, whether it’s steady income, long-term growth, or a combination of both.  Determining your needs helps you choose the right mutual fund for monthly income.
2. Assess Risk Tolerance: Understand your risk tolerance. Different mutual fund for monthly income options carry varying levels of risk, so ensure the MIP in mutual fund investments aligns with your comfort level.
3. Check Historical Performance: Examine the historical performance of the funds you’re interested in. Look for consistency in delivering monthly income and overall returns in the monthly income investments. Reviewing the track record of the top 10 MIP funds in India can provide insights into the most reliable options.
4. Diversification Matters: Opt for funds that offer a diversified portfolio. This helps spread risk and enhances the potential for stable returns.
5. Expense Ratios: Monitor expense ratios. Lower expenses can contribute to higher net returns over time, making it worthwhile to check this aspect when you decide where to invest money for monthly income.
6. Distribution Policies: Understand the fund’s distribution policies. Some funds may skip monthly payments during challenging market conditions, so assess how this impacts your plan to invest and get monthly returns.

Who Should Invest in Monthly Income Mutual Funds?

Investors seeking the best income funds for steady returns often find MIPs an ideal choice. 

1. Investors with Smaller Budgets: Monthly income funds are suitable for those looking to invest without needing substantial capital.
2. Retirees: For retirees, mutual fund for monthly income investments provide a tailored solution for generating regular cash flow, particularly from the top 10 MIP funds in India.
3. Low-Risk Investors: Monthly income plans attract low-risk investors wanting exposure to the equity market with added stability. These plans offer a balanced approach for those who are looking to invest and get monthly returns.
4. First-Time Investors: New mutual fund investors can find an MIP in mutual fund investments, which is an accessible entry point with lower risk. When considering where to invest money for monthly income, MIPs provide a structured way to gain market exposure.

However, all investors must conduct thorough research and consult a financial advisor before making any investment decision.

Risks Involved While Investing in Monthly Income Mutual Funds

Embarking on the journey of the best monthly income funds plans entails acknowledging and understanding potential risks. Here are critical aspects to consider:

• Fiscal Implications and Exit Challenges: Certain monthly income schemes enforce extended lock-in periods, some lasting up to three years. Selling before maturity incurs an exit load. Additionally, as MIPs predominantly invest in debt instruments, their tax implications align with debt investments.
• Volatility: The “low-risk” label on monthly income plans can be misleading. They are still affected by fluctuations in both stock and bond markets, which can alter the overall value of your investment.
• Interest Rate Impact: MIPs depend heavily on debt instruments, so rising interest rates can reduce their value.
• Credit Risk: Companies or governments issuing debt securities in MIPs might default, potentially causing you to lose some of your investments.
• Inflation Risk: Inflation can outpace MIP returns, gradually diminishing the purchasing power of your investment.

Taxation on Monthly Income Mutual Funds as per Union Budget 2024-25

The taxation on monthly income mutual funds depends on their asset allocation and their holding period. The Union Budget for 2024-25 has made significant changes to the capital gains taxes. These changes include:

Equity Mutual Funds

Capital Gains Tax	Holding Period	Old Rate	New Rate
Short-Term Capital Gains (STCG)	Less than 12 months	15%	20%
Long-Term Capital Gains (LTCG)	More than 12 months	10%	12.50%

Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.

Debt Mutual Funds

Capital Gains Tax	Holding Period	Old Rate	New Rate
Short-Term Capital Gains (STCG)	Less than 36 months	Taxed according to your income tax slab	Taxed according to your income tax slab
Long-Term Capital Gains (LTCG)	More than 36 months	10%	12.50%

1. Tax Rate: A flat 12.5% tax rate applies to these gains.
2. No Indexation Benefit: The previous benefit of adjusting the purchase price for inflation is removed. Now, the entire gain after three years is taxable at 12.5%.
3. Change in Holding Period for Specified Mutual Funds: Previously, debt mutual funds with a holding period of over 36 months were taxed based on the investor’s tax slab, classified as Long-Term Capital Gains (LTCG). Now, for specified mutual funds where over 65% of the investment is in debt, the holding period for taxation has been reduced to over 24 months. These funds will still be taxed according to the investor’s tax slab as either LTCG or STCG. 

Hybrid Mutual Funds

• Short-Term Capital Gains (STCG): The tax on short-term capital gains depends on the fund’s asset allocation when it comes to hybrid mutual funds. 
• Long-Term Capital Gains (LTCG): The capital gains tax on hybrid mutual funds that extend the specified period (12 or 36 months) is known as the long-term capital gain tax. 

Type of Hybrid  Fund	Short-Term Capital Gains (STCG)	Long-Term Capital Gains (LTCG)	Indexation Benefit
Equity-Oriented Hybrid Funds	20% for holdings less than 1 year	12.5% for holdings over 1 year, with gains up to Rs. 1.25 lakh tax-free	Not available
Debt-Oriented Hybrid Funds	Taxed as per income tax slab for holdings less than 3 years	12.5% for holdings over 3 years	Not available

Note: Mutual fund schemes where neither the equity nor debt orientation exceeds 65% will now be classified as long-term investments after 24 months. The previous holding period for these funds was 36 months. These will be taxed at the revised LTCG tax rate of 12.5%.

How to Invest in Monthly Income Mutual Funds?

Investors can invest in monthly income plans in three main ways:

1. Online Investment Platforms: These platforms offer a variety of monthly income funds from different fund houses, allowing investors to compare and choose the best options conveniently.
2. Asset Management Companies (AMCs): Investors can directly invest in monthly income plans through the websites or apps of AMCs, avoiding intermediaries and commissions.
3. Online Brokers or Distributors: These websites or apps provide access to monthly income funds and other mutual fund schemes, charging a nominal fee or commission for their services. For example, you can open a demat account on smallcase!

Factors to Consider Before Investing in Monthly Income Mutual Funds  

Consider the following factors while figuring out how to invest to get monthly income through mutual funds:

• Define Financial Goals: Assess your financial objectives and risk tolerance. Clearly outline income needs in alignment with potential monthly returns mutual fund returns.
• Performance Analysis: Evaluate the fund’s historical performance across different market conditions. Examine past dividend payment trends and resilience during economic uncertainty.
• Fees and Expenses: Consider the fund’s expense ratio and any additional charges. Choose funds with competitive fees to optimise investment returns.
• Manager’s Strategy: Stay informed about the fund manager’s investment strategy and approach. Ensure a clear strategy and effective management while looking for the best investment for monthly income.

To Wrap It Up…

Monthly-income mutual funds offer a balanced way to generate regular income and preserve capital. These plans invest in debt and equity instruments, aiming for stable returns with reduced volatility. Investors should evaluate their risk tolerance and investment goals before adding MIPs.

Frequently Asked Questions About Monthly Income Mutual Funds