How Do Monthly Income Plans Compare to Fixed Deposits in 2025?

In 2025, investors are increasingly seeking predictable and steady income streams that provide financial stability without exposing their capital to high risk. Among the top contenders for such needs are monthly income plans and fixed deposits (FDs). Both options cater to conservative investors, but they serve slightly different purposes—and the differences can significantly impact your financial goals.

A monthly income plan is designed to offer consistent payouts, often monthly, from investments made in debt, hybrid, or alternative sources such as peer-to-peer lending. These are perfect for retirees, homemakers, or anyone needing regular cash flow. One emerging option worth exploring is the IndiaP2P Monthly Income Plan, which combines diversification and better yields with regular payouts.

Fixed deposits, on the other hand, are time-tested instruments that offer assured interest on a lump sum invested for a fixed period. They’re highly secure and preferred for their simplicity and capital protection.

In this blog, we’ll provide a detailed, side-by-side comparison of monthly income plans and fixed deposits, examining which one might work best for you in 2025 based on returns, liquidity, risk, taxation, and overall suitability.

What Is a Monthly Income Plan?

A monthly income plan (MIP) typically refers to an investment product that provides periodic income, generally monthly. These may be:

• Hybrid mutual funds (debt-oriented)

• Peer-to-peer lending platforms (like IndiaP2P)

• Non-convertible debentures (NCDs)

• Structured deposit products

The income is derived from interest, dividends, or payouts generated by the underlying assets, and varies depending on the type of instrument and its associated risk.

Common features include:

• Monthly or regular payouts

• Capital preservation (in most low-risk plans)

• Better yield than traditional deposits in some cases

• Moderate to low risk depending on type

What Is a Fixed Deposit (FD)?

A Fixed Deposit is a secure investment offered by banks and NBFCs where an investor deposits a lump sum for a predetermined tenure at a fixed interest rate.

Key features:

• Guaranteed return

• Capital protection

• Flexible tenure options (7 days to 10 years)

• Monthly, quarterly, or cumulative interest payout options

Bank FDs are insured up to ₹5 lakh per bank via DICGC, making them one of the safest investment options.

Side-by-Side Comparison: Monthly Income Plan vs Fixed Deposit

Monthly Income Plan: Deep Dive (2025 Perspective)

Types of Monthly Income Plans in India:

1. IndiaP2P Monthly Income Plan:

   • Returns: 10–12% p.a.

   • Payout: Monthly

   • Minimum Investment: ₹5,000

   • Risk Level: Moderate (spread across hundreds of borrowers)

   • Ideal for: Income-seeking investors who want better-than-bank yields with manageable risk

2. Debt-oriented hybrid mutual funds:

   • Returns: 6–9% (market-linked)

   • Risk Level: Low to moderate

   • Payout: Via dividend or Systematic Withdrawal Plan (SWP)

3. Government-backed options:

   • Examples: Post Office Monthly Income Scheme (POMIS)

   • Returns: ~7.4% p.a.

   • Capital safety assured

Fixed Deposit: Deep Dive (2025 Context)

Fixed deposits remain one of India’s most popular investments because they are:

• Safe and insured

• Easy to understand

• Require minimal maintenance

In 2025, banks are offering interest rates in the range of:

• 6% – 7.5% for regular customers

• 7% – 8% for senior citizens (special FD schemes)

Some banks and NBFCs offer special FDs with monthly interest payout options—ideal for investors seeking predictable income.

Pros and Cons: Monthly Income Plan

Pros:

• Higher potential returns

• Monthly cash flow

• Diverse options across risk profiles

• Better inflation hedging

Cons:

• Returns not guaranteed (in many types)

• Some plans have moderate risk

• Tax efficiency may vary

Pros and Cons: Fixed Deposit

Pros:

• Guaranteed return and capital protection

• Simple and familiar

• Easy to open and manage

Cons:

• Lower returns

• Less tax-efficient (fully taxable)

• Not ideal for long-term wealth creation or income growth

Use Case: Which One Should You Choose?

Choose Monthly Income Plan if:

• You want higher monthly returns than FDs

• You are comfortable with moderate risk for better yield

• You want to diversify beyond traditional products

• You are looking for flexibility and liquidity

Choose Fixed Deposit if:

• Your priority is capital preservation

• You’re risk-averse or retired

• You want guaranteed returns without monitoring

Taxation Comparison

Always calculate post-tax return when evaluating income investments.

Expert Tip: Combine Both for Balance

Many advisors suggest using a blend of monthly income plans and fixed deposits to balance returns and risk. For example:

• 60% in FDs for capital protection

• 40% in MIPs (like IndiaP2P) for income boost

This provides a core of stability with an additional layer of cash flow performance.

Conclusion

In 2025, both fixed deposits and monthly income plans remain relevant—but their suitability depends entirely on your financial goals, income needs, and risk profile.

FDs offer predictability and peace of mind, while monthly income plans provide better income potential with a range of customization options. For those seeking a modern, diversified approach to income, options like the IndiaP2P Monthly Income Investment Plan offer a tech-enabled, yield-enhanced solution.

To explore more tailored options, check out the 10 Best Investments for Monthly Income in India. A well-balanced strategy can give you the best of both worlds—stability and income growth.