Monthly Income Plan (MIP)

MIPs (Monthly Income Plans) are a category of mutual funds that invest mainly in debt instruments. Only about 10-20% of the assets are allocated to equity stocks.


MIP is basically a product to provide regular income through investments in Fixed Income Securities & capital appreciation through investments of portion of net assets of the scheme in equity and equity related instruments. Although objective of the scheme is to pay regular income to the investors there is no such obligation/ compulsion on Fund Houses. Like any other fund, the returns are market-driven.


MIPs are launched with the objective of giving a monthly income to investors, but the periodicity depends upon the option chosen by the investor. These are generally monthly, quarterly, half-yearly and annual options. A growth option is also available, where the investors do not receive regular dividends, but gains in the form of capital appreciation.

Taxation of MIP

MIP's are debt funds and hence the taxation is same as debt funds:

Short- Term Capital Gains : Any profit before a year would be Short term capital gains and it would be added to your income and taxed at your slab rate. So for investors who are in higher tax slabs it would be wise not to sell their MIP's (in case they can) before a year, else there will be a good amount of tax on your profits.

Long Term Capital Gains : Any profit you get after 1 yr in MIP would be taxed at 10 per cent without indexation or 20 per cent with indexation, whichever is lower.

Short Term and Long term Capital Loss : In case you have any loss in MIP's , you can set it off against the capital gains in the same year or in next 8 yrs.

Dividends: All the dividends received from the MIP's would be tax-free in hands of investors, but note that companies already pay Dividend distribution tax from the MIP's

CERTIFIED FINANCIAL PLANNER,CFP are owned by Financial Planning Standard Board Ltd.(FPSB)outside the United States. FPSB India is the marks licensing authority for the CFP marks in India through agreement with the FPSB. Copyright © | Software solutions for financial planners by Wolters Kluwer.