How to Invest 50 Lakhs for Monthly Income?

If you have 50 lakhs to invest and want to earn a regular monthly income, you have several options. However, before you invest, you should consider your risk tolerance levels, investment horizon, tax implications and liquidity needs. Here are some popular schemes that offer regular returns when you invest 50 lakhs for monthly income in India:

Monthly Income from 50 Lakhs Investment

Scheme	Expected Annual Return	Expected Monthly Income
Debt Mutual Funds: Systematic Withdraw Plan*	6%	Rs. 25,000
Fixed Deposits**	7.50%	Rs. 31,250
Corporate Deposits**	9%	Rs. 37,500

Note: 

The above table is for illustrative purposes only and does not constitute investment advice. The actual returns and income may vary depending on various factors such as market conditions, taxation, charges and fees.

*Mutual funds returns are subject to market risks and do not guarantee returns. With the SWP option, investors can regularly withdraw their invested capital. 

**The monthly income from FD and CD is the interest generated from the principal amount. On maturity, the principal is repaid to the investor.

Mutual Funds

Debt Mutual Funds: Systematic Withdrawal Plans

Systematic withdrawal plans (SWPs) are a way of getting regular income from your mutual fund investments. You can choose any mutual fund scheme that suits your risk profile and investment objective and start an SWP. 

You can specify the amount and frequency of withdrawal, which can be monthly, quarterly, half-yearly or annually. The fund house will redeem the units equivalent to the withdrawal amount and transfer it to your bank account.

SWPs benefit investors who want to create a steady source of income from their investments without compromising on capital growth. SWPs are also tax-efficient as only the capital gains portion of the withdrawal amount is taxed. The taxation depends on the type and duration of the fund. 

Furthermore, it is important to note that SWP withdrawals comprise capital gains and invested capital. Only if the withdrawals are equal to or less than the capital gains, the invested capital will remain intact. 

From the above estimation, investing INR 50 lakhs for 30 years and opting for an SWP of INR 25,000, you will still have INR 43,54,632 left with you. 

However, it is essential to consider the impact of inflation. The purchasing power of INR 25,000 today will not be the same 30 years from now. The worth of INR 25,000, 30 years from now, will be INR 4,352.75 (at a 6% inflation rate).

Fixed Deposits

Fixed deposits (FDs) are one of the most popular and safe investment options for earning monthly income. You can open an FD account with any bank or post office and deposit a lump sum amount for a fixed tenure ranging from 7 days to 10 years.

You can choose the interest payout option as monthly, quarterly, half-yearly or annually. The interest rate varies depending on the tenure, amount and bank. Generally, longer-tenure FDs offer higher interest rates than shorter ones.

FDs are suitable for investors who want guaranteed returns and low risk. However, FDs have some drawbacks as well. 

Firstly, FDs are not very liquid, as premature withdrawal may attract penalty charges and lower interest rates. Secondly, FDs are not inflation-adjusted as the interest rate remains fixed throughout the tenure regardless of the changes in the inflation rate. Thirdly, FDs are not tax-efficient as the interest income is fully taxable as per your slab rate.

The FD interest income is only for the deposit duration. To generate continuous monthly income, you must renew the deposit at the end of the tenure. Most banks offer auto-renewal of FDs, but the renewal will happen at the prevailing interest rates.

Corporate Deposits

Corporate deposits are fixed deposits offered by non-banking financial companies (NBFCs) and corporates to raise funds from the public. These deposits have different tenures ranging from 1 year to 5 years and pay interest on a monthly, quarterly, half-yearly or annual basis. 

The interest rate of corporate deposits depends on the tenure, amount and credit rating of the issuer. Generally, corporate deposits offer higher interest rates than bank FDs but lower than equity funds.

Corporate deposits are suitable for investors who want higher returns and regular income. However, corporate deposits have some risks as well.

Firstly, corporate deposits have low safety of principal as they are not insured by any agency, unlike bank FDs. Secondly, corporate deposits have low liquidity, as premature withdrawal may not be allowed or involve penalty charges. Thirdly, corporate deposits have low tax efficiency as the interest income is fully taxable as per your slab rate.

Similar to fixed deposits, corporate deposits earn interest only for the tenure of the deposit. At the end of the tenure, you must invest in a new deposit scheme to generate monthly income.