Monthly Income Mutual Funds: Features, Risks and More
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 mutual funds with monthly income plans, 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 (2025)
Here is a list of the top monthly income mutual funds in India for 2025:
| Fund Name | Category | AUM (in Cr) | Expense Ratio (%) | Exit Load (%) | 3Y CAGR |
|---|---|---|---|---|---|
| Motilal Oswal Midcap Fund | Mid Cap Fund | 23703.68 | 0.65 | 1 | 29.08 |
| Bandhan Small Cap Fund | Small Cap Fund | 8474.84 | 0.45 | 1 | 26.50 |
| SBI PSU Fund | Thematic Fund | 4149.45 | 0.78 | 0.5 | 30.13 |
| HDFC Defence Fund | Thematic Fund | 3880.46 | 0.8 | 1 | 0.00 |
| ICICI Pru PSU Equity Fund | Thematic Fund | 2068.04 | 0.84 | 1 | 0.00 |
| Mirae Asset NYSE FANG+ETF FoF | FoFs (Overseas) | 1869.44 | 0.06 | 0.5 | 36.90 |
| Bandhan Infrastructure Fund | Sectoral Fund - Infrastructure | 1640.82 | 0.93 | 0.5 | 26.76 |
| Invesco India PSU Equity Fund | Thematic Fund | 1046.74 | 0.85 | 1 | 28.82 |
| LIC MF Infra Fund | Sectoral Fund - Infrastructure | 763.24 | 0.58 | 1 | 26.24 |
| Canara Rob Infrastructure Fund | Sectoral Fund - Infrastructure | 726.15 | 1.07 | 1 | 25.23 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the top monthly income mutual funds is from 11th March 2025. 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:
Motilal Oswal Midcap Fund
Motilal Oswal Midcap Fund is an equity mutual fund focused on mid-sized companies with high growth potential. It follows a research-driven strategy to identify quality businesses in emerging sectors. This fund can be suitable for investors looking for long-term capital appreciation through SIP investments. It may appeal to those exploring different types of mutual funds for wealth creation. Investors can use tools like a SIP calculator to plan investments efficiently. While midcap funds can be volatile, they offer potentially high returns over time, making them a preferred choice among growth-oriented investors.
Bandhan Small Cap Fund
Bandhan Small Cap Fund primarily invests in small-cap stocks, aiming to capture high-growth opportunities in emerging businesses. This fund is suitable for investors with a high-risk appetite and long-term investment goals. Given the volatility of small-cap stocks, it is ideal for those willing to stay invested through market cycles. The fund may be a part of an aggressive mutual fund strategy, complementing diversified portfolios. Investors can explore SIP or SWP plans to manage cash flow effectively. Regular mutual funds research can help investors track performance and market trends in this category.
SBI PSU Fund
SBI PSU Fund is an equity scheme that invests predominantly in Public Sector Undertakings (PSUs) across various industries. It seeks to benefit from government policies, economic reforms, and sectoral growth. This fund can be an option for investors looking for exposure to stable, dividend-paying companies with strong fundamentals. With a focus on large-cap PSUs, it may suit those looking for low-risk mutual funds while still participating in equity growth. Investors can plan SIP investments for disciplined wealth accumulation and use SWP plans for potential regular income from mutual funds.
HDFC Defence Fund
HDFC Defence Fund is a sectoral mutual fund focusing on India’s growing defense and aerospace industries. It invests in companies benefiting from increased defense spending and indigenisation efforts. This fund is suited for investors with a high-risk appetite looking for long-term capital growth through a niche investment theme. Given its sector-specific nature, it may be more volatile compared to diversified equity funds. Investors interested in thematic investing and long-term wealth creation can consider SIPs to average costs over time. Mutual funds research is crucial to track developments in this sector.
ICICI Pru PSU Equity Fund
ICICI Pru PSU Equity Fund focuses on Public Sector Undertakings (PSUs) across diverse sectors such as banking, energy, and infrastructure. It aims to capitalise on the strong financials and potential value unlocking in PSUs. This fund may appeal to investors seeking a mix of stability and growth. It can be part of a balanced mutual fund strategy, especially for those looking at different types of mutual funds. Investors can use a SIP calculator to plan investments systematically or opt for SWP plans for regular income from mutual funds.
Mirae Asset NYSE FANG+ETF FoF
Mirae Asset NYSE FANG+ETF FoF is an international fund that provides exposure to top global technology giants, including companies from the NYSE FANG+ Index. It is suitable for investors looking to diversify beyond Indian markets and gain access to high-growth tech stocks. This fund follows a passive investment approach, making it a low-maintenance option for global exposure. While it carries currency and geopolitical risks, it has the potential for strong long-term returns. Investors can explore SIPs for disciplined investing or SWP plans for partial withdrawals.
Bandhan Infrastructure Fund
Bandhan Infrastructure Fund is a sectoral mutual fund investing in companies engaged in infrastructure development, including power, transport, and urban projects. This fund aims to benefit from India’s growing infrastructure sector and government initiatives. Suitable for long-term investors with a high-risk appetite, it aligns with a thematic mutual fund strategy. Investors interested in economic growth-driven investments can use an SIP calculator to plan their contributions. Given its sectoral focus, periodic mutual funds research is essential to track industry trends.
Invesco India PSU Equity Fund
Invesco India PSU Equity Fund primarily invests in Public Sector Undertakings (PSUs), focusing on sectors such as energy, banking, and infrastructure. The fund aims to deliver capital appreciation by tapping into PSU growth potential. It is ideal for investors looking for equity exposure with relatively lower volatility. Investors planning SIP investments can benefit from rupee cost averaging. Those seeking mutual funds for regular income may explore SWP plans, as PSUs often pay steady dividends. This fund is best suited for those with a long-term perspective and interest in government-backed enterprises.
LIC MF Infra Fund
LIC MF Infra Fund is an infrastructure-focused mutual fund that invests in companies involved in construction, energy, transportation, and other key infrastructure segments. It is designed for investors with a high-risk tolerance looking for long-term wealth creation. Given the cyclical nature of the sector, this fund is best suited for investors with a long investment horizon. Mutual funds research is crucial to monitor the impact of policy changes on infrastructure growth. SIPs can be a good strategy to manage market fluctuations, while SWP plans can help investors withdraw systematically over time.
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. These mutual funds provide monthly income to their investors. 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. 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.
How to Invest in Monthly Income Mutual Funds?
You can easily invest in monthly income mutual funds by following these steps:
- To invest in mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
- The next step would be to research and identify the best monthly income funds to invest in which align with your investment thesis. You can easily select and learn more about the best monthly income funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. Try it now!
- Once you have selected the funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!
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 investment for regular income. By focusing on debt instruments, they provide stable income with lower risk while offering the potential for capital appreciation.
- Balanced MIPs: The best hybrid mutual funds for income 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?
Mutual Fund Monthly income plans (MIP) are mutual funds with regular payouts, where 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 mutual funds with monthly income plans 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 from their mutual funds with monthly income plans. This provides 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 ₹1,00,000 in a mutual fund and wish to withdraw ₹5,000 every month as part of your mutual fund monthly income scheme, 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 ₹5,000.
Number of Units to Redeem = Withdrawal Amount / NAV
Number of Units to Redeem = ₹5,000 / ₹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 ₹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 ₹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 = ₹5,000 / ₹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.
| Steps | Details |
| Initial Investment | ₹1,00,000 |
| Monthly Withdrawal Amount | ₹5,000 |
| Mutual Fund’s NAV | ₹20 per unit |
| Number of Units to Redeem (Month 1) | Withdrawal Amount / NAV = ₹5,000 / ₹20 = 250 units |
| Redemption Process (Month 1) | At the start of the month, the mutual fund will redeem 250 units and credit ₹5,000 to the investor’s bank account. |
| Adjusted NAV (After Month 1) | ₹22 per unit (example) |
| New Number of Units (Month 2) | Withdrawal Amount / NAV = ₹5,000 / ₹22 ≈ 227.27 units (rounded to the 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 ₹5,000 to the bank account. |
Features of Monthly Income Mutual Funds
The best mutual fund for monthly income should offer a balance of growth potential and steady income, making it a preferred choice among mutual funds plans in India.
- Investment in Debt Instruments: Mutual fund monthly income plans 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 a monthly income mutual fund scheme doesn’t guarantee a fixed income mutual funds return. This is because 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 mutual funds monthly income plan.
- Low-Moderate Risk Involved: A mutual fund monthly income plan suits 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 mutual fund monthly income plan:
- Steady Income Streams: Top-performing income mutual funds that focus on monthly income can deliver reliable and regular cash flow, providing stability for investors. A well-chosen mutual fund monthly income plan can provide investors with regular distributions.
- Tailored to Retirement Needs: The Best mutual funds in India that offer monthly income are particularly beneficial for retirees, providing a tailored solution to meet their income needs. This feature makes a monthly income mutual fund scheme an essential part of a retirement portfolio.
- Diverse Equity Exposure: Top mutual funds in India that focus on monthly income provide the advantage of a diversified portfolio with varying equity exposures. This caters to different risk appetites and investment preferences.
- Professional Management: One of the benefits of investing in mutual funds plans with a monthly income strategy is access to professional fund management. Investors leverage the expertise of mutual fund companies, ensuring that investment decisions align with market dynamics and long-term financial goals.
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?
If you’re wondering where to invest money to get monthly income, consider your financial goals, risk tolerance, and investment horizon when selecting mutual funds plans. Follow these steps to make informed decisions:
- Define Your Objectives: Clearly outline your financial objectives—whether it’s steady income, long-term growth, or both. Determining your needs while considering the top 5 mutual funds in India for monthly income helps you choose the right plan.
- Assess Risk Tolerance: Different best mutual funds in India for monthly income carry varying levels of risk, so ensure the mutual fund plans align with your comfort level.
- Check Historical Performance: Examine the past performance of the top performing mutual funds focused on monthly income. Look for consistency in delivering returns, and check out an MIP mutual fund calculator to estimate potential returns.
- Diversification Matters: Choose top mutual funds in India with a diversified portfolio. to spread risk and enhance stable returns.
- Expense Ratios: Monitor expense ratios in top mutual funds, as lower costs contribute to higher net returns.
- Distribution Policies: Understand the fund’s payout policies, as some mutual fund monthly income plans may skip monthly payments during challenging market conditions.
Who Should Explore Monthly Income Mutual Funds?
Investors seeking the best income funds for steady returns often find MIPs an ideal choice.
- Retirees: For retirees, mutual funds for monthly income investments provide a tailored solution for generating regular cash flow. MIPs are considered one of the best SIP for monthly income.
- Low-Risk Investors: The best monthly income plan in India attracts 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.
- 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.financial advisor before making any investment decision.
Risks Involved While Investing in Monthly Income Mutual Funds
While considering what is the best investment for monthly income, here are critical aspects to evaluate:
- Fiscal Implications and Exit Challenges: Certain top mutual funds in India enforcing extended lock-in periods may charge an exit load for early withdrawals. Additionally, as MIPs predominantly invest in debt instruments, their tax implications align with fixed-income mutual funds.
- Volatility: Even the best investment for monthly income in India faces fluctuations in both stock and bond markets, impacting overall value.
- Interest Rate Impact: Since top performing mutual funds that focus on monthly income depend on debt instruments, rising interest rates can reduce their value.
- Credit Risk: Companies issuing debt securities in fixed income mutual funds might default, leading to investment losses.
- Inflation Risk: Inflation can outpace mutual fund monthly income plan returns, gradually diminishing the purchasing power of your investment.
Taxation on Monthly Income Mutual Funds
The taxation on monthly income mutual funds depends on their asset allocation and their holding period. Here’s the taxation on mutual funds –
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 ₹1.25 lakh per year are tax-free. This is an increase from the previous limit of ₹1 lakh.
Tax Rate: The gains exceeding ₹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% |
- Tax Rate: A flat 12.5% tax rate applies to these gains.
- 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%.
- 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%.
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 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
Monthly income mutual funds invest in debt and equity securities to generate cash flows and preserve capital. Investors can also opt for a systematic withdrawal plan (SWP) to generate monthly income.
Monthly income mutual fund returns vary based on market conditions and fund performance. These funds aim to provide a steady income stream through dividends and interest payments. Even high return monthly income mutual funds are subject to market fluctuations, and historical performance does not guarantee future results.
Monthly income mutual funds give a steady income stream while balancing risk. Ideal for those looking for regular payouts. These funds are widely regarded as the best mutual funds for pensioners and retired individuals. These funds are suitable for long-term investors aiming for financial stability.
Mutual funds can provide monthly income. Opt for a Systematic Withdrawal Plan (SWP) within a mutual fund scheme for a consistent and scheduled payout.
Here is a list of the best mutual funds for monthly income based on the highest AUM:
–Motilal Oswal Midcap Fund
–Bandhan Small Cap Fund
–SBI PSU Fund
–HDFC Defence Fund
–ICICI Pru PSU Equity Fund
Note: This list’s data was taken on 11th March 2025.
