From SCSS To Tax-Free Bonds: Best Tax-Efficient Ways To Earn Monthly Income From Rs 1 Cr Corpus

With a corpus of Rs. 1 crore, investors can design a portfolio that generates consistent monthly income while optimising post-tax returns. The right combination of instruments should balance safety, liquidity, and growth based on the investor's age, goals, and risk appetite.

"If a retiree has Rs 1 crore and wishes to generate Rs 1 lakh per month, there is no tax liability on total income up to Rs 12 lakh under the new regime (from FY 2025-26) because of the rebate under Section 87A. Therefore, by opting for the new regime, you can escape taxation without significant tax planning strategies if your income for the financial year is up to Rs 12 lakhs. However, the income should not include special-rate items like capital gains or online gaming winnings, since income taxable at special rates doesn't have the benefit of the rebate under the new regime," commented CA Chandni Anandan, Tax Expert at ClearTax.

Systematic Withdrawal Plans (SWP) from Mutual Funds

A Systematic Withdrawal Plan allows investors to receive a fixed monthly payout from a lump-sum investment in debt or hybrid mutual funds. Only the capital-gains portion of each withdrawal is taxed as short-term gains (less than 12 months) at the investor's slab rate and long-term gains (exceeding Rs. 1.25 lakhs and held over 12 months) at 12.5% without indexation.

"This structure provides regular income while deferring tax liability. Typically, conservative hybrid or short-duration debt funds may yield 6 to 9 per cent annually, translating to a monthly income of about Rs. 70,000 - Rs. 80,000 with a relatively low tax impact," said CA (Dr.) Suresh Surana.

Tax-Free Bonds (PSUs such as NHAI, REC, PFC)

Tax-free bonds issued by government-backed entities remain one of the most reliable and tax-efficient avenues. They generally offer 7 to 7.5 per cent annual interest, completely exempt under Section 10(15)(iv)(h) of the IT Act.

"Although long-term in nature, these bonds are exchange-listed and carry minimal credit risk. An Rs. 1 crore investment may generate Rs. 7 - Rs. 7.5 lakh per year of tax-free income," commented CA (Dr.) Suresh Surana.

Senior Citizens' Savings Scheme (SCSS)

Available to investors aged 60 and above, the SCSS currently offers an interest rate of around 8.2% per annum, reviewed quarterly. Interest is taxable at slab rates, but a deduction of up to Rs. 50,000 per year is available under Section 80TTB. The tenure is 5 years, extendable by another 3, making it ideal for retirees seeking secure, government-backed income.

Post Office Monthly Income Scheme (POMIS)

The Post Office Monthly Income Scheme provides a steady income at about 7.4% per annum for a 5-year term. Interest is taxable, yet the product is favoured for its sovereign guarantee and simplicity. The investment limit is Rs. 9 lakh for individuals and Rs. 15 lakh for joint accounts, allowing families to diversify holdings across multiple accounts.

Corporate Fixed Deposits and Non-Convertible Debentures (NCDs)

Corporate FDs and NCDs can enhance yields, offering around 8 to 9.5 per cent depending on issuer and tenure. Interest is taxable at slab rates, but many products provide monthly or quarterly payout options for cash-flow convenience.

"To manage credit risk, only AAA-rated issuers may be opted for, and exposure limited to a portion of the portfolio," recommended CA (Dr.) Suresh Surana.

Real Estate Investment Trusts (REITs) / Infrastructure Investment Trusts (InvITs)

REITs and InvITs distribute periodic income comprising dividends, interest, and capital gains. Yields typically range from 6 to 8 per cent. The dividend component may be tax-exempt if the underlying special-purpose vehicle has not opted for a concessional tax regime.

"Being exchange-listed, these instruments provide liquidity and diversification into real assets, suitable for investors with moderate risk tolerance," says CA (Dr.) Suresh Surana.

Dividend Options from Equity / Hybrid Mutual Funds

Under the dividend plan, mutual funds distribute part of their profits periodically. Although dividends are taxable at the investor's slab rate, this option provides convenience for those preferring automatic payouts without redeeming units.

"It is better suited to investors with moderate or higher risk tolerance seeking equity participation along with income stability," stated CA (Dr.) Suresh Surana.

Conclusion

A blended strategy enhances income stability and tax efficiency. Such a mix can produce a post-tax monthly income while preserving the principal. Diversification across instruments minimises reinvestment and tax risk.

Investors should review allocations periodically in line with interest-rate changes, income needs, and evolving tax laws to maintain an optimal, tax-efficient income stream. It would be advisable to consult your financial planner before making any investment decisions.

Disclaimer

The views and recommendations expressed are solely those of the individual analysts or entities and do not reflect the views of GoodReturns.in or Greynium Information Technologies Private Limited (together referred as "we"). We do not guarantee, endorse or take responsibility for the accuracy, completeness or reliability of any content, nor do we provide any investment advice or solicit the purchase or sale of securities. All information is provided for informational and educational purposes only and should be independently verified from licensed financial advisors before making any investment decisions.