Monthly Income Plans (MIPs): Definition, Investment Strategies, and Taxation


Monthly income plans (MIPs) are mutual fund strategies designed to generate stable income through a mix of debt and equity securities. Popular, especially in India, MIPs attract retirees seeking steady income rather than capital gains. This article explores how MIPs work, their investment strategies, taxation in the U.S. and India, and alternative monthly income options for investors.

What is a monthly income plan (MIP)?

A monthly income plan (MIP) is a mutual fund strategy emphasizing debt and equity securities to generate cash flows and preserve capital. Tailored for retirees, it offers a steady income through dividends and interest payments.

Understanding monthly income plans (MIPs)

Monthly income plans, a type of mutual fund, aim to preserve capital and generate cash flow through a conservative mix of debt and equity securities. While the equity portion is low, around 20%, the bulk consists of debt securities, ensuring steady returns. It’s crucial to note that MIPs don’t guarantee monthly income and can be affected by market volatility and interest rate fluctuations.

How monthly income plans invest

Investors must align their income needs and risk tolerance with MIPs, understanding that monthly dividend payments aren’t guaranteed. A well-suited MIP can provide a stable monthly income, aiding precise budgeting. The types of equities invested in vary, and adherence to regulations, like those set by the Securities and Exchange Board of India (SEBI), ensures transparency.

Taxation of monthly income plans

Taxation of MIPs differs between the United States and India. In the U.S., standard interest and dividend calculations apply, with short-term gains taxed as income and long-term gains taxed at 15% or 20%. In India, MIPs are treated as debt schemes, with dividends taxed as income and varying rates for short-term and long-term capital gains.


Here is a list of the benefits and drawbacks to consider.

  • Stable income for retirees.
  • Diversification through a mix of debt and equity securities.
  • Preservation of capital.
  • No guarantee of monthly income.
  • Subject to market volatility.
  • Tax implications on dividends and capital gains.

Frequently asked questions

What is the goal of a monthly income plan?

Monthly income plans aim to preserve capital and generate cash flows, primarily benefiting older investors and retirees seeking a steady income stream. Their design, with a higher focus on debt securities, aligns with the goal of providing stability.

How are monthly income plans taxed?

Taxation varies based on the country where MIPs are offered. In the U.S., it follows standard calculations, while in India, dividends are taxed as income, and capital gains have specific rates based on the holding period.

What options are available to investors for monthly income?

Investors have various options for monthly income, including mutual funds like MIPs, annuities, government bonds, fixed deposits, dividend-paying stocks, real estate, and real estate investment trusts (REITs). Consulting a financial professional is essential to choose the option aligning with individual needs.

Key takeaways

  • Monthly income plans (MIPs) are mutual fund strategies for stable income.
  • They invest in a mix of debt and equity securities, with a focus on preserving capital.
  • MIPs, popular in India, suit retirees looking for steady income.
  • Taxation varies between the U.S. and India, impacting dividends and capital gains.
  • Investors have diverse options for monthly income, including MIPs, annuities, and real estate.
View article sources
  1. 5 steps to creating your retirement income plan – University of Central Florida
  2. Retirement Income Plan – Williams College
  3. Retirement Income Plan (Pension) – Sandia National Laboratories
  4. Income Annuities: Definition, Types, and Real-Life Scenarios – SuperMoney