Are you looking for a "salary-like" income even after retirement? Or perhaps you want your savings to pay for your monthly household expenses?

For many Indian investors, the traditional Fixed Deposit (FD) has been the go-to option. However, with changing interest rates and rising inflation, smart investors are shifting towards Monthly Income Bonds.

Whether you are a retiree, a homemaker, or a professional building a passive income stream, these bonds can provide the financial stability you need. At BondsAdda, we simplify the complex world of debt markets to help you invest confidently.

What Are Monthly Income Bonds?

Simply put, a Monthly Income Bond is a loan you give to a company or the government. In return, instead of paying you interest once a year or at the end of the term, they pay you interest every single month.

Think of it like renting out a house: You own the asset (the bond), and you get rent (interest) every month. At the end of the agreement (maturity), you get your house (principal amount) back.

Why Are They Becoming Popular in India?

• Regular Cash Flow: Perfect for monthly bills (electricity, groceries, maintenance).
• Better Returns: Often offer higher interest rates than standard bank FDs.
• Stability: Unlike the stock market, your income doesn't fluctuate daily.

How Does It Work? (A Real-Life Example)

Let’s say you want to invest. 5 Lakhs to support your monthly budget.

• Investment Amount: 5,00,000
• Bond Type: Corporate Monthly Income Bond
• Interest Rate (Coupon): 8.4% per annum
• Tenure: 7 Years

The Calculation:

1. Annual Interest: 5,00,000 × 8.4% = 42,000 per year
2. Monthly Payout: 42,000 ÷ 12 = 3,500 per month

Result: You receive 3,500 directly in your bank account every month for 7 years. At the end of the 7th year, your full 5,00,000 is returned to you.

Top 3 Types of Monthly Income Options

Not all monthly income options are the same. Here is how they differ based on safety and returns:

1. Government & PSU Bonds (The "Safe Haven")

Issued by the Government of India or Public Sector Undertakings (PSUs).

• Safety: Very High (Government-backed).
• Returns: Moderate (6% – 8%).
• Examples: NHAI Bonds, REC Bonds, PFC Bonds, RBI Floating Rate Savings Bonds.
• Best For: Conservative investors who want zero risk.

2. Corporate Bonds / NCDs (The "High Earner")

Issued by private companies. These are technically called Non-Convertible Debentures (NCDs).

• Safety: Depends on the company's Credit Rating (AAA is best).
• Returns: High (8% – 11.25%).
• Examples: Kerala Financial Corporation (8.89%), Manba Finance.
• Best For: Investors willing to take a slight risk for better monthly income.

3. Monthly Income Plans (MIPs)

These are Mutual Funds, not bonds. They invest in debt markets but declare dividends.

• Note: The monthly payout is not guaranteed. If the market is down, you might not get paid that month.
• Best For: Investors who want potential capital appreciation alongside income.

Quick Comparison: Which One is Right for You?

Popular Monthly Income Instruments (2025-26 Watchlist)

If you are looking for opportunities currently available or frequently traded, here are some examples tracked by market analysts:

High-Yield Corporate NCDs:

• 13.00% AKARA CAPITAL ADVISORS PRIVATE LIMITED 29 OCT 2028
• 12.00% VEDIKA CREDIT CAPITAL LTD 2029
• 11.40% KEERTANA FINSERV LIMITED 24 OCT 2027

Note: Corporate NCD yields are higher because they carry more risk than government bonds. Always check the credit rating before investing.

Government-Backed Schemes:

• Post Office Monthly Income Scheme (POMIS): 5-year tenure, extremely safe.
• Senior Citizens’ Savings Scheme (SCSS): For those aged 60+, offering tax benefits under Section 80C.

• 9.49% Kerala Infrastructure Investment Fund Board 2035

The Pros and Cons

Before investing, it is important to look at both sides of the coin.

The Advantages

1. Predictable Income: You know exactly how much money will hit your account each month.
2. Capital Protection: Unlike stocks, your principal amount stays intact (if held to maturity).
3. Beat Inflation: High-rated NCDs often beat inflation rates, preserving your purchasing power.
4. No Principal Withdrawal: You don't have to "sell" units to get cash; the bond pays you automatically.

The Risks

1. Credit Risk: If a private company goes bankrupt, it may default on payments. Solution: Stick to AAA or AA-rated bonds.
2. Interest Rate Risk: If market rates rise, bond prices fall. Solution: Hold the bond until maturity to avoid loss.
3. Taxation: Interest earned is usually added to your total income and taxed as per your slab (Income from Other Sources).

Who Should Invest?

Monthly Income Bonds are not for day traders. They are best suited for:

• Retirees: Replacing a monthly salary.
• Homemakers: Creating an independent income source.
• Parents: Paying for recurring tuition fees or coaching classes.
• Conservative Investors: Those who want better returns than FDs but dislike stock market volatility.

Frequently Asked Questions (FAQs)

Q1: Are monthly income bonds better than Bank FDs? A: 

Generally, yes. Corporate NCDs usually offer interest rates 1% to 3% higher than traditional bank FDs. However, FDs are insured up to ? 5 Lakhs by DICGC (Deposit Insurance and Credit Guarantee Corporation), while corporate bonds rely on the company's financial health.

Q2: Is the monthly payout guaranteed?

 A: Yes, for Government Bonds, Post Office schemes, and Corporate NCDs, the interest rate is fixed and guaranteed. For Mutual Fund MIPs, it is not guaranteed.

Q3: How is the interest taxed?

A: The interest you earn is added to your annual income and taxed according to your income tax slab.

Q4: Can NRIs invest? 

A: Most corporate NCDs do not allow NRI investment. However, NRIs can invest in specific government securities or NRE FDs.

Q5: What is the most important thing to check before buying? 

A: Always check the Credit Rating. A rating of AAA (Triple A) or AA indicates the issuer is financially strong and likely to pay on time.

Conclusion: Invest with Confidence

Building a second stream of income is no longer a luxury—it is a necessity. Monthly Income Bonds offer a balanced path between the low returns of FDs and the high risk of the stock market.

At BondsAdda, we are committed to making bond investing simple and transparent. We help you compare yields, check ratings, and discover the best monthly income opportunities tailored to your needs. You just need to contact us, and the rest we will take care of.

Ready to secure your monthly cash flow? Explore our curated list of bonds today and make your money work for you.