760769 SIP myths you must know!
Various savings instruments such as MIS, FD MIS, MF SWP, SCSS, etc, are there which give monthly income.
In these uncertain times, everybody, especially senior citizens need regular flow of income from investments. Even those who earn salaries and wages often feel the need for income from investments due to uncertainties that were amplified during the Covid pandemic. Simultaneously, dipping interest rates have driven down income from debt instruments that are a repository of trust of an overwhelming number of Indian citizens.
Many are turning to equity-based instruments because of the higher return, ignoring the risk element.
A few monthly income options available in the market are Post Office Monthly Income Schemes (MIS), Fixed Deposit MIS, Mutual Fund SWP. However, their rates of return and degree of risk vary from one another.
Money9 gives you a guide to six regular-income-related investment instruments in these grim times.
Post office MIS
Post Office MIS or monthly income scheme is one of the most secure investment avenues. Post Office MIS can be opened either by an individual or by two-three people with an equal share of investment and comes with tenure of 5 years.
Investors holding a single account can make investments up to Rs 4.5 lakh, whereas with a joint account the investment amount can go up to Rs 9 lakh. The Post Office MIS currently offers an interest rate of 6.6% on investment amount and also a 5% terminal bonus.
Fixed deposit MIS
With guaranteed returns at a certain rate of interest every month, fixed deposit monthly income schemes offer regular monthly fixed income to the investor. Depending on the bank, the duration of the FD monthly income scheme goes up to 10 years.
The interest in these schemes is usually paid monthly to the investor. Hence, if an individual wants a regular yet fixed and guaranteed income, he/she can opt for this instrument. Under the FD monthly income scheme, withdrawals can also be made before maturity with nominal penalty.
One should also know that banks deduct TDS on the interest income earned by you if the yearly interest income exceeds Rs 10,000 level.
Long-term government bond
Long-term government bonds are another safe option to earn regular income. The maturity period is considerably long, i.e. 15-20 years. Government bonds generally offer 8% return and is paid twice a year.
So, one can combine them with other investments to earn income throughout the year. Also, on maturity, you get back the entire principal amount. Another benefit of a long-term government bond is that they are traded in the secondary market and hence, one can sell them off as and when he/she wishes.
Senior citizen savings scheme
Senior citizen savings scheme or SCSS is an exclusive scheme designed for senior citizens only. Only individuals of 60 years and above can invest in this scheme. This scheme still offers 7.4% yearly interest, compounded quarterly.
Interest income is paid after every three-month interval throughout the year. The senior citizen saving scheme is offered both by banks and post offices throughout the country. However, it must be availed within the first month of receiving the retirement benefit and also the deposit must not exceed the benefit received.
While the maturity tenure of the scheme is five years, it can be extended by another three years. Individuals can make a minimum investment of Rs 1,000 to a maximum of Rs 15 lakh.
SWP from mutual fund
Systematic Withdrawal Plan (SWP) in mutual funds is an excellent way to ensure a steady monthly income. In this scheme, one can specify a certain amount that he/she wants as a monthly payment. So, every month on a designated date, units corresponding to that amount would be redeemed and the amount would be credited to the bank account.
The Mutual Fund SWP comes with both the regular and dividend option, however, the dividend payout is not guaranteed. Individuals also get the option of opting for debt schemes, apart from equity schemes.
PM Vaya Vandana Yojana
PMVVY not only offers senior citizens a stable income, but also gives them social security. Individuals can also opt for this scheme by paying a lump sum amount ranging from Rs 1.5 lakh to a maximum of Rs 15 lakh. The Rs 15 lakh amount is for one individual. If a couple is applying the maximum amount can be Rs 15 lakh X 2 = Rs 30 lakh.
The person will get monthly pension immediately depending upon the tenure and the amount of the investment. Currently, this scheme offers 7.4% interest per annum. Along with maturity benefits, PMVVY also offers pension payment and death benefits to the investors.