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What are monthly income plans?

Are monthly income plans (MIP) and debt oriented hybrid plan the same thing?


A monthly income plan is a debt oriented hybrid mutual fund scheme that invests around 70-80% of its total corpus in debt instruments such as debentures, government securities, etc. While the remaining part is invested in equity instruments.

The aim of such a fund is to provide the investor with periodic payments on a monthly basis. MIPs usually have monthly, quaterly, half-yearly and annual options. MIPs provide regular, stable returns with low risk.

There are two types of MIPs:

  1. Dividend based MIP
  2. Growth based MIP


Monthly Income plans are plans that seek to declare a dividend every month. These plans therefore invest largely in debt securities. However, a small percentage is invested in equity shares to improve the scheme’s yield (usually between 15% to 25%).

These funds have 2 options, namely growth and dividend. In growth option investor do not get any dividend whereas in the dividend option investors are paid dividends. The payment of dividend might not be monthly, it depends on the amount of the surplus and various other factors which are looked by the fund manager of the fund.

These funds are best suited for retired persons, housewives, freelancers, part time workers etc, who seek to earn some extra income over and above what they are earning from fixed deposits, regular income and pensions.

One of the limitations of these schemes is that the returns on these schemes are subject to taxation by the Indian government because these are categorized under debt schemes for the purpose of taxation. If the investments are sold within three years of purchase, the returns are added to the income and taxed at the rate of income tax and if the units are sold after three years of purchase they are considered as long term capital gain and are taxed at fixed rate of 20%.

If you want to start investing in these schemes, please click here

Some of the top performing Monthly Income Plans are:

Kavita Soni

Monthly Income Plan is basically a debt mutual fund scheme which includes investment in both equity as well as debt funds. Yes monthly income plan and debt oriented hybrid plan are the same things.

  • Debt proportion in monthly investment plan is predominant as compared to equity
  • Major proportion (75-95%) of monthly income plan consists of debt investment and equity investment comprises of 5-25 % only
  • These funds are suitable for investors who want a balance of risk in their portfolio and does not to invest aggressively in equity and at the same time want to earn stable returns by investing in debt funds
  • Average rate of return for monthly income plans is 9-12%
  • In terms of taxation, monthly income plans are treated in the same manner as debt funds
  • If you go for dividend based investment then the return you get is either monthly, quarterly, half-yearly or annually

Advantages of monthly income plans include:

  • Regular returns
  • Suitable for investors with moderate risk profile
  • Can be used as growth investments as well
  • Little tax liability and no volatility

For details on some of the popular monthly income plans, please open attached fund details.

Happy balanced investing!

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