Savings Plans Available in India
A monthly plan offers regular contributions and, in some cases, fairly predictable returns. Here are popular options available to Indian investors in 2025.
Unit Linked Insurance Plans (ULIPs)
ULIPs are popular because they combine life cover with market-linked investments . A part of your premium goes towards providing life insurance, while the rest is invested in market linked funds like equity, debt, liquid or hybrid options based on your risk appetite and long-term goals. These plans have a lock-in of five years. ULIPs also allow fund switching and partial withdrawals after the lock-in period, subject to policy terms and conditions,making them flexible for long-term financial planning.
ULIP premiums are eligible for deductions up to ₹1.5 lakh per year under Section 80C of the Income Tax Act, 1961 (if opted for old tax regime). The death benefit (the sum assured) payable to your nominee is also tax-exempt under Section 10(10D).
Annuity Plans
Annuity plans help you create regular income in your retirement years. You pay at once or through staggered payments into the plan while you’re earning, and once the plan reaches its vesting age you can receive a steady income for life or for a chosen period. Annuity plans also qualify for tax deductions under Section 80C (up to ₹1.5 lakh per year), although the annuity payouts you receive are taxable as income, if opted for the old tax regime.
Post Office Monthly Income Scheme
The Post Office Monthly Income Scheme (POMIS) is a government-backed savings option with a fixed 5-year lock-in period. It’s considered safe, especially for risk-averse investors, and has a tenure of five years. The returns are also fixed and not linked to the market.
In 2025, POMIS interest rates are 7.4% per annum, which is payable to you every month. You can open a POMIS account at your nearest post office with a minimum deposit of ₹1,000, and the maximum permissible investment is ₹4.5 lakh per individual1.
Senior Citizens’ Savings Scheme (SCSS)
In this scheme the interest is computed quarterly and can be used as monthly income by systematic withdrawals (if certain conditions are met). This government-sponsored plan runs for a fixed tenure of five years and can be opened at any authorized bank or post office. However, this tenure is extendable by an additional 3 years upon application.
SCSS is a low-risk investment option that currently offers a competitive interest rate of 8.2% per annum, credited quarterly. Investors can start with a minimum deposit of ₹1,000 and invest up to ₹30 lakh in a financial year. Deposits made into SCSS are eligible for a deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh in a financial year (under the old tax regime).2
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY is a retirement cum pension scheme for senior citizens that comes with a fixed annual interest rate. Being government-backed, it provides stable returns, ideal for those looking to secure a fixed income in retirement. You can choose the payout frequency as monthly, quarterly, half-yearly or yearly.
Long-Term Government Bonds
Long-term government bonds are debt securities issued by the Government of India to borrow money from investors for funding various government expenditures and development projects. They pay a fixed interest rate on maturity and come with flexible investment tenures.
Monthly Income Mutual Fund Plans
Monthly Income Plans (MIPs) are hybrid mutual funds that primarily invest in debt instruments, with a smaller allocation to equity. MIPs are one of the most popular monthly investment plan options for people who want a consistent cash flow and a potential for modest capital gain at the same time. However, the returns are subject to capital gains tax, so factor this in when planning your investments.
Benefits of monthly investment plans
Power of compounding
Investment experts advises that long-term investment strategy has proved beneficial historically. By investing in a monthly investment plan, you are more likely to reap the benefit of the multiplier effect due to long-term investment strategy.
Rupee cost averaging
Investing a fixed amount regularly helps you buy more units when prices are low and fewer units when prices are high, which averages out your overall cost.
Benefitting from monthly investments
A small amount of investment on a regular basis falls easy on the investor’s pocket. A ULIP plan gives investors the option to invest a fixed premium regularly. This is a better option to go about with investments (by investing systematically) during volatile market conditionsand reduces the burden of market timing on the investor. Besides, investors can use a ULIP return calculator to understand their maturity benefit from these regular investments.
Maximizing gains with fund switching options
ULIPs offer investors flexibility in managing their investments. Through ULIPs, investors can switch between different funds based on their investment strategy. This flexibility helps investors plan their investments more effectively during market fluctuations. Fund switches can be made considering market conditions, remaining term to maturity, risk profile, and individual asset allocation. Many ULIPs today provide unlimited free fund switches.
Meeting life goals
Monthly investment strategy enables the investor to build an inflation-adjusted corpus over a period of time, which helps tide over market fluctuations. By following the monthly investment plan, you can make steady progress towards your life goals. The maturity benefit at the end of the policy term could help you achieve your goals.
With a ULIP plan, you can enjoy market-linked returns through periodic investments and within a defined period. The power of compounding concept, rupee cost averaging principle, fund switching option, and disciplined investments work in tandem to help you take a step closer to your financial commitment and life goals.
How to choose the right investment amount?
When choosing a monthly investment plan, the right amount to invest depends on your income, lifestyle and financial goals.
Understand Your Goals
The first step towards any kind of investment is to define what you are investing in. It could be for your retirement, your child’s education, a dream home, or simply for creating a wealth corpus. Your goal will help decide the right investment plan and amount.
Upcoming Planned Expenses
If you expect large expenses in the near future (like buying a car or home renovation), keep some liquidity aside and adjust your investments accordingly.
Ongoing Monthly Expenses
Analyze your monthly expenses like your rent, whatever EMIs you pay and all other regular bills. Allocate only what you can comfortably set aside each month without affecting your lifestyle.
Number of Financial Dependents
The more dependents you have, the higher your financial responsibilities can be. Factor in these obligations before locking in a monthly contribution amount.
Why ULIPs Are Considered an Ideal Monthly Investment Option
ULIPs is a suitable monthly investment plan because it combines life insurance and market-linked growth. They’re ideal for long-term wealth creation and give you the flexibility to adjust your fund portfolio according to your financial needs.
Budget-Friendly Premiums
You can start with modest premiums and increase your contributions (as per the opted payout, let’s say monthly) as your income increases. This makes ULIPs a very accessible form of investment tool, even for first-time investors.
Flexible Fund Switching
ULIPs allow you to switch between funds, if you feel any of your funds are not performing as desired or your risk appetite changes.
Option for Partial Withdrawals
After the 5-year lock-in period, ULIPs allow for partial withdrawals. This feature adds liquidity, allowing you to meet unexpected financial needs without disturbing your entire investment.
Built-in Life Cover
An important benefit of ULIPs is the life cover that secures your family financially in case of your untimely death.
Conclusion
A monthly income investment plan helps you invest systematically every month and helps you create a fund corpus in the long run. ULIPs are a popular choice due to their dual benefit of life cover and market-linked growth, but there are several other options that you can explore. Government schemes, annuities, or mutual funds are all good choices, depending on how much risk you are willing to take or what your goals in life are.
Key Takeaways
- Monthly contributions encourage you to consistently save or invest money every month.
- Contributing smaller amounts regularly makes these options easier to manage within a budget.
- You can choose from ULIPs, annuity plans, government schemes, mutual funds, and more, depending on your goals and risk preferences.
FAQs
What are the key benefits of investing monthly rather than annually or lump sum?
Investing monthly helps you extend your investment cost over time, so that it becomes much easier on your budget. It reduces the pressure of timing the market and allows you to benefit from rupee cost averaging and compounding.
Who should consider investing in annuity plans?
Annuity plans are ideal for someone who is nearing retirement age or are looking for guaranteed income. They’re best suited for risk-averse investors who want a predictable payout after investing during their working years.
How do Systematic Withdrawal Plans (SWPs) differ from SIPs?
SIPs are about investing regularly in mutual funds, while SWPs allow you to withdraw a fixed amount from your investment each month. SWPs are suitable for generating regular income, whereas SIPs focus on wealth creation.
Are government bonds a safe monthly investment option?
Government bonds are considered one of the safest investment options because they are backed by the government. They provide steady and predictable income, making them a reliable choice for conservative investors looking for monthly payouts.
What are the advantages of monthly income mutual fund plans?
Monthly income mutual fund plans are designed to provide regular income, typically through a mix of investments. Key advantages include:
- Regular payouts
- Diversification across asset classes
- Professional fund management
How can I choose the right amount to invest each month?
To determine your monthly investment amount, consider the following:
- Your financial goals (e.g., retirement, buying a house, etc.)
- Time horizon (short-term vs. long-term needs)
- Risk appetite
- Current income and expenses
A good rule of thumb is to start small and gradually increase your investments as your income grows.
Why are ULIPs considered flexible for monthly investments?
Unit Linked Insurance Plans (ULIPs) offer flexibility in several ways:
- You can start with modest premiums and scale up over time
- They allow fund switching based on market conditions or risk preference
- You can choose your premium payment frequency
- They offer a mix of investment and insurance, adapting to changing financial needs
Is life cover included in all monthly investment plans?
No, not all monthly investment plans include life cover. Investment options like mutual funds, stocks, or bonds focus solely on wealth creation. However, plans like ULIPs or traditional insurance-cum-investment policies do include a life insurance component.
Sources:
- https://cleartax.in/s/post-office-monthly-income-scheme-pomis
- https://cleartax.in/s/senior-citizen-savings-scheme
