Mutual Fund for corpus with monthly returns

I am looking forward to invest in a Mutual Fund on irregular basis whenever I have surplus money. This Mutual Fund should give out regular monthly returns which I can use to pay out wages to labourers.

I have looked at equity based monthly dividend plans and also Debt based. But I do not quite understand what are the advantages over other? What other options do I have?

My main requirement is, I do not want any tax implications on the monthly regular returns from the funds neither do I want any tax implications on the final lumpsum return of the folio. I don’t mind a lock-in period to get advantage of tax benefit under 80C section of Income Tax.

Kindly suggest what exactly I should be looking at.

Thanks & Regards,
Raj Pawan G

although I am no expert enough but won’t you need current account to pay out to labours as these are your business expenditure?

It’s basically not a big business I am planning of, it would be some farm wages only which I plan on. Any bank accounts would have very limited growth, I look forward to Mutual Funds so that I can make the most out of whatever little corpus I will build.

Dividends you receive are already after tax so you do not have to pay tax on the dividend you earn.
You can go with MFs they have monthly dividends.

If you do not want to redeem your MF units then you can go with Equity MFs.
Even if you decide it redeem after a year, it will be taxed as Long Term Capital Gain which is 3 years in case of Debt Funds.

But you should keep in mind that Equity MFs are riskier than Debt Funds.To be on the safer side, you can go with an STP Option (Zerodha doesn’t have this feature currently though) - whenever you get the lumpsum amount, put it in Debt Fund and from than slowly transfer funds to Dividend Yielding Equity Index Mutual Funds as a SIP.

Thank you so much for suggestions! If I redeem after 1 year, long term capital gains are tax exempted as I understand, hope this is correct?

I am not aware of STP option, I will research on it, any pointers in this front will definitely help me!

At the same time, do I get 80C section income tax benefits on any of these?


For Sec 80C benefit, you can invest up to 1.5L / annum in Tax Savings fund. These are equity funds yielding good return but it is locked for 3 years from the date of investment.

STP = Systematic Monthly Transfer

Check out Money Manager funds, like the Reliance Money Manager fund. Just like an FD but with a higher return rate of above 8%.