Individuals looking for monthly income, especially retired individuals need to look at monthly income plans. While MIPs is a word associated largely with mutual funds, here we have used the same to provide broad based investment opportunities for our readers.
There are many options that individuals can look at from banks to post office to non banking finance companies. Here are 5 best monthly income plans we feel should be a good bet for investors.
1. Tamil Nadu Power Finance & Infrastructure Ltd
Tamil Nadu Power Finance & Infrastructure Ltd (TNPF) probably offers the best monthly income plan in terms of safety and interest rate. This is particularly so for senior citizens. For example, senior citizens are entitled to a monthly interest rate of 8.75 per cent for 36, 48 and 60 month deposits. This is by far the best and since the company is a government of Tamil Nadu owned enterprise there is absolutely no problem in terms of safety.
For non senior citizens the interest rate offered is 8.25 per cent, which is again not bad at all. With interest rates having fallen across the board it would not be a bad idea to look at TNPF deposits.
2. Mahindra Finance
Here again the monthly interest rate is very competitive. Mahindra Finance offers an interest rate of 8.20 per cent for its 33 and 40 months deposit. This is not bad at all, given that Mahindra Finance FDs are rated AAA by the leading credit rating agencies in the country.
Senior citizens are entitled to a slightly higher rate of interest of 8.30 per cent over the 33 and 40 months tenure.
However, the minimum amount that is applicable is Rs 50,000. This FD is not a bad bet in a falling interest rate regime.
3. Post Office Monthly Income Plan
The Post Office Monthly Income plan is another good scheme for investors looking at monthly income. It has numerous advantages as compared to other traditional investments.
The interest rate at the moment is 7.6 per cent and is regularly changed by the Government of India. At the moment this a decent interest rate, especially for individuals looking at monthly income. Those wishing to buy can invest a maximum of Rs 4.5 lakhs only. However, if you open an account jointly, you can invest a sum of Rs 9 lakhs.
What is most interesting is that any number of accounts can be opened by individuals, subject to the maximum limit.
4. Monthly Income Plans of mutual funds
The returns from these funds are highly uncertain. So, while the above three monthly income plans that we have mentioned offered you assured returns, one cannot be certain about monthly income plans from mutual funds. What these funds do is that they invest a bulk of their corpus in debt, typically it can be 80 per cent and the balance 20 per cent they tend to park in equities. As the returns from equities is uncertain, the overall returns from MIP of mutual funds remains uncertain. Therefore, one needs to be cautious given that especially for retired individuals, they cannot take too much of a risk.
5. Bajaj Finance
Bajaj Finance offers an interest rate of 8.28 per cent on its 36 and 60 month deposits. This too is not a bad deal at all considering that the deposits are rated as AAA by Crisil.
Go for this scheme, given that the company has had a strong financial performance and is well rated by the rating agencies. One can invest in the FD using a debit card and there is an auto renew facility as well.
6.Taxation on MIPs
It really depends on the type of investment that you opt for. If you look for FDs of companies than the interest is added to your total income and is taxed according to your tax bracket. Even post office monthly deposits do not offer tax benefits as such. In fact, none of the monthly income plans offer any tax gains as such. So, they are not very tax efficient instruments.
However, those looking for MIPs generally maybe retired folk and those depending on such income. Hence, for them tax saving may not be paramount, though returns most certainly would be.