Every week, I receive messages from NRIs in Dubai asking the same question: "Ankur, I have AED 200,000 saved. How do I generate ₹50,000 monthly income without eating into my principal?"
The answer isn't straightforward.
Search "best mutual funds for monthly income" and you'll find dozens of lists. Each ranks funds differently. Some prioritize returns. Others focus on stability. Few explain their ranking logic.
This creates a problem. You end up comparing apples to oranges.
A fund ranked #1 for 5-year returns might be highly volatile. A fund with massive AUM might have mediocre performance. A recently launched fund might show impressive short-term numbers but lack a track record.
That's why we've built this guide differently.
Instead of giving you one "best" list, we're providing four separate lists. Each uses different criteria. Each serves a different purpose.
👉 Tip: No single fund is "best" for everyone. Your ideal choice depends on your income needs, risk tolerance, and tax situation.
How We've Built These Lists
Before we show you the rankings, let's establish trust.
Why no single fund is "best for everyone":
Regular income needs vary. A 55-year-old planning retirement in India needs different funds than a 40-year-old building supplementary income. Your NRI tax status affects which funds make sense. Your currency preference matters.
What criteria we've used:
We've created four distinct lists based on:
- 5-year historical returns (growth potential)
- Third-party Morningstar ratings (risk-adjusted analysis)
- AUM and fund longevity (stability indicators)
- Recent launches (emerging options, not ranked)
Why multiple lists exist:
Each ranking method answers a different question:
- "Which funds have grown the most?" (Returns-based)
- "Which funds balance risk and reward best?" (Rating-based)
- "Which funds have investor confidence?" (AUM-based)
- "What new options exist?" (New funds)
Understanding Regular Income From Mutual Funds
Before diving into lists, let's clarify how mutual funds generate regular income.
Option 1: Systematic Withdrawal Plan (SWP)
An SWP lets you withdraw a fixed amount monthly from your mutual fund investment. Your remaining corpus continues growing. This is more tax-efficient than dividend plans for most NRIs.
Example: You invest ₹50 lakh in a balanced advantage fund. You set up a monthly SWP of ₹40,000. With average returns of 12-15%, your corpus can potentially last 20+ years while providing steady income.
Option 2: Dividend Yield Funds
These invest in companies that pay regular dividends. The fund collects dividends and passes them to you. Returns depend on company dividend policies.
Option 3: Hybrid Funds with Debt Component
Conservative and balanced hybrid funds combine equity growth with debt stability. The debt portion provides regular interest income. The equity portion offers growth potential.
👉 Tip: For NRIs, SWP from equity-oriented funds (65%+ equity) is often more tax-efficient than dividend plans due to favourable LTCG taxation.
List A: Best Funds for Regular Income (Based on 5-Year Returns)
Ranking Criteria: This list is sorted by highest 5-year CAGR returns as of December 2025. These are direct plan returns.
Disclaimer: Past performance does not guarantee future results. Higher returns often come with higher volatility.
Balanced Advantage & Dynamic Allocation Funds
These funds dynamically shift between equity and debt based on market conditions. Ideal for SWP setups.
Fund Name | 5-Year CAGR | 3-Year CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|
HDFC Balanced Advantage Fund | 23.0% | 19.1% | 1,06,494 | 0.74% |
ICICI Prudential Multi-Asset Fund | 24.88% | 22.1% | 68,000 | 0.93% |
Parag Parikh Flexi Cap Fund | 20.90% | 16.33% | 1,48,568 | 0.63% |
SBI Equity Hybrid Fund | 16.64% | 14.5% | 81,952 | 0.78% |
ICICI Prudential Balanced Advantage Fund | 13.54% | 13.9% | 68,450 | 0.90% |
Source: Value Research, INDmoney, December 2025
Dividend Yield Funds
These funds invest in high-dividend companies. Suitable for investors seeking equity exposure with income focus.
Fund Name | 5-Year CAGR | 3-Year CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|
ICICI Prudential Dividend Yield Equity Fund | 31.7% | 25.7% | 5,936 | 0.60% |
Franklin India Dividend Yield Fund | 24.92% | 19.92% | 2,367 | 1.23% |
Aditya Birla SL Dividend Yield Fund | 23.29% | 21.48% | 1,511 | 1.42% |
LIC MF Dividend Yield Fund | 23.22% | 24.05% | 1,200 | 1.10% |
UTI Dividend Yield Fund | 22.17% | 21.89% | 3,822 | 1.50% |
Source: Angel One, Scripbox, December 2025
👉 Tip: ICICI Prudential Dividend Yield Fund leads with 31.7% five-year returns, but remember dividend payments depend on underlying company policies.
List B: Best Funds for Regular Income (Based on Morningstar Ratings)
Ranking Criteria: This list includes funds with Morningstar 4-star and 5-star ratings. Morningstar evaluates funds based on risk-adjusted returns compared to category peers.
What Morningstar ratings mean:
Morningstar is an independent research firm. Their star ratings consider:
- Historical returns relative to category
- Risk (volatility) compared to peers
- Consistency of performance over 3, 5, and 10 years
5-star funds fall in the top 10% of their category. 4-star funds are in the next 22.5%.
Top-Rated Hybrid Funds for Income
Fund Name | Morningstar Rating | 5-Year Return | Risk Level | Category |
|---|---|---|---|---|
HDFC Balanced Advantage Fund | ★★★★★ | 23.0% | Moderate | Dynamic Asset Allocation |
Parag Parikh Flexi Cap Fund | ★★★★★ | 20.90% | Moderate | Flexi Cap |
SBI Equity Hybrid Fund | ★★★★ | 16.64% | Moderate | Aggressive Hybrid |
ICICI Prudential Equity & Debt Fund | ★★★★ | 18.5% | Moderate | Aggressive Hybrid |
Canara Robeco Equity Hybrid Fund | ★★★★ | 15.2% | Low-Moderate | Aggressive Hybrid |
Source: Morningstar India, Value Research, December 2025
Top-Rated Conservative Options
Fund Name | Morningstar Rating | 5-Year Return | Risk Level | Category |
|---|---|---|---|---|
ICICI Prudential Regular Savings Fund | ★★★★ | 12.18% | Low | Conservative Hybrid |
Canara Robeco Conservative Hybrid Fund | ★★★★ | 10.5% | Low | Conservative Hybrid |
Kotak Debt Hybrid Fund | ★★★★ | 11.2% | Low | Conservative Hybrid |
SBI Conservative Hybrid Fund | ★★★ | 9.8% | Low | Conservative Hybrid |
Source: Morningstar India, December 2025
👉 Tip: For retirees prioritizing capital protection, conservative hybrid funds with 4-star ratings offer stability with modest growth. Compare these with GIFT City FDs for a balanced approach.
List C: Best Funds for Regular Income (Based on AUM & Stability)
Ranking Criteria: This list is sorted by Assets Under Management (AUM). Higher AUM indicates greater investor trust and typically better liquidity.
Why AUM matters for income investors:
Large AUM suggests:
- More investors trust the fund
- Better liquidity for redemptions
- Lower impact cost during SWP withdrawals
- Typically more experienced fund management teams
However, very large AUM can limit a fund's flexibility to invest in smaller opportunities.
Largest Hybrid & Balanced Funds by AUM
Fund Name | AUM (₹ Cr) | Fund Age | 5-Year Return | Fund House |
|---|---|---|---|---|
Parag Parikh Flexi Cap Fund | 1,48,568 | 12 years | 20.90% | PPFAS |
HDFC Balanced Advantage Fund | 1,06,494 | 31 years | 23.0% | HDFC AMC |
SBI Equity Hybrid Fund | 81,952 | 30 years | 16.64% | SBI MF |
ICICI Prudential Multi-Asset Fund | 71,900 | 23 years | 24.88% | ICICI Pru |
ICICI Prudential Balanced Advantage Fund | 68,450 | 18 years | 13.54% | ICICI Pru |
HDFC Hybrid Equity Fund | 24,684 | 20 years | 16.55% | HDFC AMC |
Source: AMFI, INDmoney, December 2025
Most Established Dividend Yield Funds
Fund Name | AUM (₹ Cr) | Fund Age | 5-Year Return | Min SIP |
|---|---|---|---|---|
SBI Dividend Yield Fund | 9,094 | 2 years | N/A | ₹500 |
HDFC Dividend Yield Fund | 6,191 | 5 years | 22.89%* | ₹1,000 |
ICICI Prudential Dividend Yield Equity Fund | 5,936 | 11 years | 31.7% | ₹1,000 |
UTI Dividend Yield Fund | 3,822 | 20+ years | 22.17% | ₹1,000 |
*Since inception for funds less than 5 years old
Source: Groww, Value Research, December 2025
👉 Tip: HDFC Balanced Advantage Fund has operated for 31 years through multiple market cycles. This track record matters when you're depending on the fund for regular income.
List D: Recently Launched Funds (Not Ranked)
Important: These funds are NOT ranked. They lack sufficient track record for fair comparison. We include them so you're aware of emerging options.
Why new funds can't be compared fairly:
- Less than 3 years of performance data
- Haven't been tested through market corrections
- NAV history too short for meaningful analysis
- Expense ratios may change as AUM grows
New Income-Oriented Funds (2022-2025)
Fund Name | Launch Date | Category | Initial AUM | Current AUM |
|---|---|---|---|---|
SBI Dividend Yield Fund | Oct 2023 | Dividend Yield | ₹3,500 Cr | ₹9,094 Cr |
Baroda BNP Paribas Dividend Yield Fund | 2023 | Dividend Yield | ₹800 Cr | ₹1,200 Cr |
HDFC Dividend Yield Fund | Dec 2020 | Dividend Yield | ₹2,000 Cr | ₹6,191 Cr |
Bajaj Finserv Balanced Advantage Fund | 2024 | Dynamic Allocation | ₹500 Cr | ₹1,500 Cr |
Source: AMFI, Fund House Websites, December 2025
Recommendation: Wait for at least 3-5 years of performance data before investing significant amounts in new funds for income purposes.
How SWP Works: Real Numbers
Let's see how a Systematic Withdrawal Plan generates monthly income.
Example: ₹50 Lakh Investment in HDFC Balanced Advantage Fund
Assuming 15% average annual return:
Monthly Withdrawal | Corpus After 10 Years | Corpus After 15 Years | Corpus After 20 Years |
|---|---|---|---|
₹30,000 | ₹1.25 Cr | ₹2.45 Cr | ₹4.80 Cr |
₹40,000 | ₹95 Lakh | ₹1.68 Cr | ₹2.95 Cr |
₹50,000 | ₹65 Lakh | ₹92 Lakh | ₹1.15 Cr |
₹60,000 | ₹35 Lakh | ₹18 Lakh | Depleted |
Calculations assume 15% CAGR. Actual returns will vary.
The 4% Rule: A common retirement guideline suggests withdrawing no more than 4% annually from your corpus. For ₹50 lakh, that's ₹2 lakh per year or approximately ₹16,667 monthly. This conservative approach helps ensure your money lasts 25-30 years.
👉 Tip: Use our team's SWP calculator approach. Start with a conservative 4% withdrawal and adjust based on actual fund performance over 2-3 years.
NRI Tax Implications on Regular Income
Understanding taxation is crucial for NRIs planning regular income from mutual funds.
SWP Taxation (2025 Rules)
Fund Type | Holding Period | Tax Rate | TDS Rate |
|---|---|---|---|
Equity-oriented (65%+ equity) | Less than 12 months | 20% (STCG) | 20% |
Equity-oriented (65%+ equity) | More than 12 months | 12.5% (LTCG above ₹1.25 lakh) | 10% |
Debt-oriented | Any period | Slab rate | 30% |
Hybrid (35-65% equity) | Less than 24 months | Slab rate | 30% |
Hybrid (35-65% equity) | More than 24 months | 12.5% | 10% |
Source: Income Tax Act, HSBC Tax Reckoner 2025-26
Key Points for NRIs:
- TDS is deducted at source regardless of your actual tax liability
- File ITR to claim refunds if TDS exceeds your actual tax
- DTAA benefits may reduce your tax burden. Check India-UAE DTAA guide for specifics
- Tax Residency Certificate required to claim DTAA benefits. Learn how to claim DTAA benefits
👉 Tip: Equity-oriented hybrid funds (65%+ equity) offer better tax efficiency for long-term SWP compared to debt funds. The 12.5% LTCG rate beats 30% slab rate taxation.
Building Your Regular Income Portfolio
Based on my experience advising NRIs, here's how to structure your income portfolio:
Conservative Approach (Lower Risk, Steady Income)
- 40% Conservative Hybrid Funds (ICICI Prudential Regular Savings)
- 30% Balanced Advantage Funds (HDFC BAF, ICICI Pru BAF)
- 20% GIFT City USD FDs for currency protection
- 10% Liquid Funds for emergency buffer
Expected Blended Return: 10-12% annually Suitable Withdrawal Rate: 4-5% annually
Moderate Approach (Balanced Risk-Return)
- 50% Balanced Advantage Funds
- 25% Dividend Yield Funds (ICICI Pru, UTI)
- 15% GIFT City Mutual Funds for tax-free growth
- 10% Liquid Funds
Expected Blended Return: 12-15% annually Suitable Withdrawal Rate: 5-6% annually
Growth-Oriented Approach (Higher Potential, More Volatility)
- 40% Flexi Cap Funds (Parag Parikh, HDFC Flexi Cap)
- 30% Dividend Yield Funds
- 20% Balanced Advantage Funds
- 10% Small Cap allocation for growth kicker
Expected Blended Return: 15-18% annually Suitable Withdrawal Rate: 6-7% annually (with volatility buffer)
Common Mistakes to Avoid
1. Choosing dividend plan over growth + SWP
Dividend plans seem appealing for income. But dividends are taxed at your slab rate (up to 30% for NRIs). SWP from growth plans is taxed as capital gains (12.5% for LTCG). The math favours SWP.
2. Withdrawing more than returns generate
If your fund earns 10% and you withdraw 12%, you're eating into your principal. This leads to corpus depletion. Stick to the 4% rule initially.
3. Not accounting for currency fluctuation
If you need income in AED, rupee depreciation (historically 3-4% annually) reduces your effective returns. Consider GIFT City USD-denominated options for currency protection.
4. Ignoring tax while comparing returns
A debt fund earning 8% with 30% tax gives you 5.6% post-tax. An equity fund earning 12% with 12.5% LTCG gives you 10.5% post-tax. Always compare post-tax returns.
5. Not diversifying across fund houses
Don't put all your income-generating investments in one fund house. Spread across 2-3 AMCs to reduce concentration risk.
The GIFT City Alternative for Regular Income
For NRIs, GIFT City investments offer a compelling alternative:
Benefits:
- Zero capital gains tax for NRIs
- USD-denominated options protect against rupee depreciation
- No NRE/NRO account required
- Easier repatriation process
- Same Indian AMCs manage the funds
Available Options:
- DSP Global Equity Fund for diversified equity exposure
- Tata India Dynamic Equity Fund for balanced growth
- GIFT City USD Fixed Deposits offering 5-5.5% returns
Explore all options in our GIFT City Mutual Funds Explorer.
Next Steps
Assess your income needs: Calculate exactly how much monthly income you require and for how long
Check your tax status: Use our Residential Status Calculator to confirm your NRI status
Ensure compliance: Run the Compliance Compass to verify your investment eligibility
Compare FD rates: Use our NRI FD Comparison Tool to see if FDs suit part of your portfolio
Start small: Begin with one fund, set up SWP, and expand based on experience
Building regular income from mutual funds isn't about finding the "best" fund. It's about matching your specific needs with the right combination of funds, withdrawal strategies, and tax planning.
Have questions? Join our WhatsApp community where many NRIs discuss income strategies daily.
Ready to start? Download the Belong app to explore GIFT City investment options.
Sources
- Value Research Online - Fund performance data (valueresearchonline.com)
- Morningstar India - Fund ratings (morningstar.in)
- AMFI India - AUM data (amfiindia.com)
- INDmoney - Fund comparisons (indmoney.com)
- Groww - Current NAV and returns (groww.in)
- Angel One - Dividend yield fund analysis (angelone.in)
- HSBC Mutual Fund Tax Reckoner 2025-26
- Business Today - Hybrid fund analysis (businesstoday.in)
- Income Tax Department India - NRI taxation rules
