Top Monthly Income Plan (MIP) MF’s to invest for 2014

Top-Monthly-Income-Plan-Mutual fundsTop Monthly Income Plan/Scheme (MIP) MF’s to invest for 2014

Monthly Income Plan/Scheme (MIP) mutual funds work similar to debt funds, yet they provide regular income by means of dividends. If you are a senior citizen or individual looking for regular dividend income, you can consider monthly income plan mutual funds under your portfolio. In this article, I would discuss about monthly income plan, their features, how they are tax efficient and some of the top monthly income plan mutual funds which you can invest for 2014.

Types of Monthly Income Plan (MIP) Mutual funds

There are 2 types of MIP mutual funds.

a) Dividend option: These mutual funds pay dividend at regular intervals like monthly, quarterly or annually.

b) Growth Option: These mutual funds  would not pay you a regular income, but the returns are re-invested. Means your NAV would increase year on year. Generally investors would adopt dividend option as they are meant to provide steady income.

Also read: 5 Best Investments to get regular or monthly income

Points to remember before investing in MIP mutual funds

  • Returns or income is not guaranteed. These would depend on the performance of the mutual fund scheme.
  • Dividends are paid from returns and not from the capital. E.g. if you invested Rs 10,000 and there are no much appreciation and your money is still Rs 10,000 only, MIP mutual funds would not pay any dividend. They would pay only once your money starts earning returns.
  • Returns are tax free, but dividend distribution tax is paid by mutual fund company. Indirectly these are reduced from the overall returns.
  • These are liquid investments. You can exit at any time. If you redeem before 1 year exit load is 1% and after 1 year nil.

How is the performance of MIP Mutual funds?

They are providing returns of 8% to 11% returns per annum.

How these Monthly income plan mutual funds are taxed during redemption?

  • While returns are tax free in the hands of investor, when you redeem, you may get capital appreciation. E.g. If you invested Rs 10,000 and in one year you would have got Rs 1,000 as dividend income which is paid by the company. Now there is no tax on this Rs 1,000. However when you are redeeming these mutual funds, assume that you would have got Rs 10,500. Means there is a profit of Rs 500 during redemption. This amount would be taxed as below
  • If the redemption is < =1 year – Short term capital gain – The amount needs to be added to individual income and tax needs to be paid based on individual income tax slab
  • If the redemption is >1 year – Long term capital gain – The amount would be treated as long term capital gain and you need to pay income tax based on that.

How MIP Mutual funds are comparable with other monthly income schemes?

Returns: MIP mutual funds provide returns of 8% to 11% p.a. Bank FD would provide returns of 9% to 10% p.a. and PO MIS scheme provides around 8.5% returns. If you are looking for higher returns by taking some risk, you should consider MIP mutual funds.

Taxation: FD and POMIS returns would be taxed based individual tax bracket. MIP Mutual funds are taxed as DDT – 13.74% which is deducted by the mutual fund company itself. If you are in a high tax bracket of 20% or 30%, the tax component on MIP mutual funds would be low.

Tenure: PO MIS scheme is for 5 years. Bank FD or MIP MF’s can be taken away/redeemed at any point of time with some terms and conditions.

Premature withdrawal: Bank FD can be withdrawn anytime, however pre-closure penalties are being imposed by some banks. PO MIS, you can take out before tenure, however you need to pay 3% of interest if you withdraw between 2 to 3 years and 1% if you withdraw between 3 to 5 years. MIP Mutual funds can be exited within 1 year with an exit load of 1% and beyond 1 year exit load is nil. Hence MIP mutual funds are more flexible to withdraw compared to others.

Top Monthly income plan (MIP) Mutual funds to invest for 2014

Below are the top-8 MIP mutual funds to invest for 2014. You can review and consider them as part of your portfolio.

Top Monthly Income Plan-MIP-Mutual fund to invest for 2014

Also Read: Invest in Tax Saving FD Schemes offering high interest

For whom these MIP mutual funds are suitable?

  • Investors looking for steady income
  • Best options for conservative investors
  • Good for lump sum investments who want to have regular and better income compared to bank FD or PO MIS scheme.

Conclusion: I felt MIP mutual funds are good for investors who are looking for regular income. These scores high compared to bank FD or Post office MIS Scheme. These could be good for retired or senior citizens who might be looking for regular income. Since these are like debt mutual funds, it carries low risk. One should keep this in mind before investing in these mutual funds.

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Top Monthly Income Plan/Scheme (MIP) MF’s to invest for 2014


  • Prashanth

    Hi Mr Suresh,

    How to invest in these plans? is it through SIP and select Dividend option if I need dividend at regular intervals? if my understanding is correct these are like normal equity mutual funds but suitable for short term and for the purpose of monthly income, please clarify


  • Prashanth

    Hi Mr Suresh,

    I think I am too late to read this nice article. Today for the first time I have come to know about this MIP MFs. Thanks again. I have a query regarding these recommendations, is the table indicated about still hold good for 2016 as well? or if you have already recommended for 2016 please update me with the link as could not find it.

    Thanks again,

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