Compare Monthly Income Schemes in India

Introduction

Are you looking for a steady monthly income to secure your finances?

Maybe you’re planning for retirement or just want a safe way to earn regular cash.

The Post Office Monthly Income Scheme (POMIS) is a solid choice, offering 7.4% interest paid monthly. It is backed by the government, hence an ideal safe choice for most investors.

But what if POMIS doesn’t suit your needs? Maybe you want higher returns, tax benefits, or more flexibility.

Let’s explore some reliable alternatives available in India.

Why Look Beyond POMIS?

POMIS is great for its safety and monthly payouts. It’s perfect for risk-averse folks like my uncle, who loves its guaranteed returns.

But it has limits.

• The maximum investment is Rs.9 lakh for single accounts and Rs.15 lakh for joint ones.
• Interest is taxable, with no Section 80C benefits.
• The 5-year lock-in might feel restrictive too.

So, what other schemes can give you similar stability with maybe a bit more?

Let’s dive into some trusted options that I’ve researched for you.

1. Senior Citizen Savings Scheme

If you’re over 60, the Senior Citizen Savings Scheme (SCSS) could be your first choice.

It’s government-backed, like POMIS, so your money is safe.

You invest a lump sum amount, and it pays 8.2% interest per year, credited quarterly. That’s higher than POMIS’s 7.4%.

You can invest up to Rs.15 lakh, and the tenure is 5 years, extendable by 3 more years.

My once neighbour aunty used to swears by SCSS. She invested Rs.10 lakh and gets Rs.20,500 every quarter.

It covers her monthly expenses nicely.

Plus, you get Section 80C tax deductions up to Rs.1.5 lakh, unlike POMIS.

But the thing is, it also has some drawbacks:

• First, which is obvious, it’s only for senior citizens or those over 55 who retired under VRS.
• Interest is taxable, and TDS applies if it exceeds ₹50,000 yearly.
• If you’re not a retiree, it isn’t worth a look.

2. Bank Fixed Deposits

Fixed deposits (FDs) from banks are everyones first choice. It feels safe, right?

Most banks offer a monthly interest payout option. This is what makes them a direct alternative to POMIS.

Interest rates range from 6.5% to 7.5% for 1-5 years, with senior citizens getting an extra 0.5%.

For example, SBI offers around 7% for a 5-year FD. You can invest as little as Rs.1,000, with no upper limit.

I know a friend, who put Rs.8 lakh in an SBI FD. He gets about Rs.4,600 monthly, which he uses for his daughter’s school fees.

FDs are insured up to Rs.5 lakh by DICGC, so they’re safe. Read, what happens to deposits if a bank close down.

You can also choose tenures from 7 days to 10 years, unlike POMIS’s fixed 5 years.

But interest is taxable, and TDS kicks in if it crosses Rs.40,000 yearly (Rs.50,000 for seniors).

FD for MIS is both flexibility tempting for all type of investors, isn’t it?

3. NBFC Fixed Deposits – Higher Returns, Slight Risk

Non-Banking Financial Companies (NBFCs) like Bajaj Finance offer FDs with monthly payouts.

Rates can go up to 8.5% for 3-5 years, beating POMIS.

There’s no upper investment limit, and tenures are flexible. I know a person who invested Rs.3 lakh in a Bajaj Finance FD at 8.2%. She gets Rs.2,050 monthly. I think she is savings these payout which she’ll later use for her travel to Kerala.

NBFC FDs are slightly riskier than bank FDs or POMIS.

But reputed NBFCs have high credit ratings, like AAA, ensuring safety. Check here for top AAA rated NBFC bonds in India.

Interest is taxable, with TDS applicable. If you’re okay with a tiny bit of risk for better returns, this could work.

4. National Savings Certificate – Tax-Saving

The National Savings Certificate (NSC) is another government-backed scheme.

It offers 7.7% interest, compounded annually, paid at maturity after 5 years.

You can invest a minimum investment is Rs.1,000, with no upper limit, in denominations of Rs.100, Rs.500, Rs.1,000, Rs.5,000, and Rs.10,000

Unlike POMIS, NSC qualifies for Section 80C deductions up to Rs.1.5 lakh.

Interest is taxable, but there’s no TDS.

How to get monthly income?

Reinvest the maturity amount in another scheme, like an FD, for monthly payouts. I’ve done this for myself. When I was planning to leave my Job (read about me here) in 2013, this was the first thing I did. I discussed with my father and bought a Rs.5 Lakhs worth of NSC Certificate.

To invest Rs.5 lakh in NSC, I visited a post office. I had to submit a completed NSC application form (Form 1) with KYC documents (identity proof, address proof, photograph). I then deposited Rs.5 lakh via a demand draft.

I opted for the denominations of Rs.10,000, 50 certificates.

After 5 years (lock-in period), my maturity amount was about Rs.7.15 lakh at 7.7% p.a. compounded annually. I withdrew that amount and invested in a 10-year bank FD with a monthly interest payout option.

At the rate of 6.6%, the monthly payout from the bank was about Rs.3850 per month.

5. Monthly Income Plan Mutual Funds

Mutual funds aren’t just for the stock market.

Monthly Income Plan (MIP) mutual funds invest mostly in debt (bonds) with a small equity portion.

Returns aren’t fixed but hover around 6%-8% yearly, based on market performance.

You can set up a Systematic Withdrawal Plan (SWP) for monthly payouts.

I know a friend who invested Rs.4 lakh in an MIP. His SWP gives him Rs.3,000 monthly.

It’s not guaranteed like POMIS, but there’s no lock-in, and long-term capital gains (over 3 years) are taxed at 20% with indexation.

That’s more tax-efficient than POMIS’s fully taxable interest.

If you’re okay with some market risk, why not explore MIPs?

6. Annuity Plans – Lifetime Income

Annuity plans from insurance companies like LIC offer guaranteed monthly payouts, often for life.

You pay a lump sum, and returns range from 5% to 7%, lower than POMIS.

Tenure can be fixed or lifelong.

My uncle bought an LIC annuity for Rs.20 lakh. He gets Rs.9,000 monthly for life, covering his medical bills.

There’s no upper investment limit, but liquidity is low in Annuity. You can’t withdraw early.

Some plans offer Section 80C benefits. Interest is taxable.

If lifelong income is your main goal (without worrying too much about the rate of return), I think no other MIS Scheme will beat Annuity.

7. Post Office Time Deposit

The Post Office Time Deposit (POTD) is similar to POMIS.

The 5-year option offers 7.5% interest, slightly higher than POMIS’s 7.4%.

Interest is compounded quarterly but can be paid out periodically.

You can invest from Rs.1,000 with no upper limit.

It’s government-backed, so it’s as safe as POMIS.

Many senior citizens use POTD for their savings. They links POTD account to their POSA (Post Office Savings Account) for periodic withdrawals.

Plus, the 5-year POTD qualifies for Section 80C deductions. Interest is taxable, with no TDS.

If you are fixed on POMIS but want tax benefits, POTD is worth considering.

Comparing the Options

Each scheme has its strengths. SCSS suits seniors with its high 8.2% rate and tax benefits. Bank and NBFC FDs offer flexibility and competitive rates. NSC and POTD are great for tax savings. MIPs bring diversification, while annuities ensure lifelong income. Here’s a quick look:

Scheme	Interest/Return	Tenure	Tax Benefits	Risk
SCSS	8.2%	5 years	Section 80C	Zero
Bank FD	6.5%-7.5%	Flexible	None	Low
NBFC FD	Up to 8.5%	Flexible	None	Low
NSC	7.7%	5 years	Section 80C	Zero
MIP Mutual Funds	6%-8%	Flexible	LTCG benefits	Moderate
Annuity Plans	5%-7%	Flexible	Some 80C	Low
POTD (5-year)	7.5%	5 years	Section 80C	Zero

Which One Should You Pick?

The choice depends on your needs.

• Are you a senior citizen? SCSS is hard to beat.
• Need flexibility? Go for bank or NBFC FDs.
• Want tax savings? NSC or POTD are smart.
• If you’re younger and okay with some risk, MIPs could work.
• For lifelong security, annuities are ideal.

I remember my father struggling to pick a scheme. He wanted safety and monthly income. He chose POMIS for its simplicity but later added an FD for extra returns.

What’s your priority – safety, returns, or tax benefits? Think about it.

A Few Tips Before You Invest

Check the latest interest rates on official websites like Indian Post Office or bank portals.

Rates change, so stay updated.

Compare tax implications – schemes with Section 80C benefits can save you money.

Always read the fine print, especially for NBFCs or mutual funds.

If you want to explore more with a slight risk, you can check this article for how to earn Rs.1 lakhs per month from dividend income.

Conclusion

In India, we have plenty of reliable monthly income schemes beyond POMIS.

Each has its own unique flavors.

SCSS, FDs, NSC, MIPs, annuities, and POTD cater to different needs.

Whether you’re planning for retirement or saving for your kids, there’s an option for you.

Which one feels right for your wallet? Explore, compare, and invest wisely. Share with me your views in the comment section below.