All you wanted to know about Monthly Income Plans from Mutual Funds in India

Subscribe to GoodReturns
For Quick Alerts
For Daily Alerts
    All you wanted to know about Monthly Income Plans from Mutual Funds in India
    Monthly Income Plans (MIPs) from Mutual Funds are largely for investors looking at steady monthly income, though they do offer a variety of options today. Investment made by mutual funds from MIP proceeds are largely invested in safe instruments, thus ensuring that investors get steady if not guaranteed returns.

    Nature of investments

    Most of the Monthly Income Plans invest in high quality debt instruments thus ensuring that your money invested is safe. They might also allocate some portion of the proceeds in equities, though this would not be more than 20 per cent of the funds. This may help to generate slightly superior returns than the traditional fixed deposits.

    Types of investment

    MIPs offer two types of schemes. One would be the growth option, while the other would be the regular dividend option. The dividend option may further have an option of monthly, quarterly or yearly dividends. In the growth option an individual could redeem his or her units at the net asset value prevailing as on the date of redemption.


    If you opt for the dividend option, you would not have to pay any tax, as dividend is tax free in the hands of the investors. However, the Mutual Fund has to pay a dividend distribution tax, which means your dividend gets reduced automatically due to the tax paid.

    On the other hand if you opt for the growth option than you have to pay a long term capital gains tax, which has currently been enhanced to 20 per cent for non equity funds. So, any which ways there is a tax liability that has to be dealt with.

    Dividends to be declared from surplus only

    Dividends from MIPs need to be declared only from surplus. Hence, if the NAV is higher then the offer price, there is scope to declare dividend. Otherwise, there remains no scope for dividend declaration.



    With the tax liability on MIPs, the returns generated would be more or less in line with other fixed yielding instruments like bank deposits. Also, the recent change in long term capital gains rate and tenure in the Union Budget has put a spoke in the wheel for such investments. It's also easier and faster to redeem bank deposits online. Go for Monthly income Plans only if you would like to diversify your debt portfolio.

    Story first published: Monday, August 4, 2014, 11:11 [IST]
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more