5 Reasons Why You Should Invest in Income Funds This Year


If you’re looking for an alternative source of income, regular income mutual funds can be a great option. Check out the top reasons why you should invest in them this year.

Making a Living Without a Job, Barbara Winter’s world-renowned book that came out in 1993 advised people to create multiple “profit centres” rather than focusing on a single source of income. It has been almost 25 years since the book came out and its teachings are still as good as new, especially in our modern times.

A major reason for this is the fact that it is easier to create multiple small income generating streams as compared to creating a large one. And with so many different income options now available, implementing this principle is easier than ever. If you are focused on creating multiple income streams, one of the top options is to invest in regular income funds.

Here are some of the reasons that make such funds a great choice-

  1. Minimum Risk Investment

No matter if you are a risk-averse investor or are retired and looking for a safer way to generate profits higher than traditional options like FDs, regular income mutual funds are the way to go.

These funds invest most of your money in debt market instruments with fixed returns and maturity to help you generate regular income with minimum risk. With most regular income schemes, the main goal is providing regular income to the investors and not capital appreciation.

  1. Actively Managed

These are actively managed funds with fund managers regularly making changes to the portfolio as per the economic and interest rate changes.

Rest assured that the fund managers would actively look for opportunities to deliver better returns while also ensuring maximum safety.

  1. Equity Investment

Some part of the portfolio is always invested in the equity and equity-related securities to help the fund generate better returns. However, the equity exposure is limited to make sure that the fund performance does not suffer extensively due to the volatility in the equity market.

While the income is not guaranteed at fixed intervals, the managers still do their best to provide a consistent income.

  1. Highly Liquid

As these funds are highly liquid, an investor can easily invest in them and redeem their investments as and when required. While these funds have an exit load of 1% if you redeem the units within one year of investment, there are zero redemption charges after this duration.

Moreover, you can also start a SIP with just Rs. 1,000 a month in these funds. If you do not have a lump sum amount to invest, SIP in these funds can be an excellent option.

  1. Taxation

A regular income plan is taxed just like a debt fund. This means that all your short-term (less than 36 months) gains are added to your income and taxed as per your income tax slab rate.

For long-term (more than 36 months) gains, a tax of 20% with indexation and 10% without indexation is applicable. This also makes these funds a tax-efficient way to earn regular income.


No matter if you’re a working professional, retired, or a housewife, if you want to create an additional source of income, regular income mutual funds are one of the best choices. Understand these benefits, and it shouldn’t be difficult for you to understand why these funds should definitely be part of your investment portfolio.

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