# Best Mutual Funds for Building Regular Income - NRIs Guide Author: Ankur Choudhary Author URL: https://getbelong.com/blog/author/ankur-choudhary/ Published: 2025-12-21 Category: NRI Investment Category URL: https://getbelong.com/blog/category/nri-investment-guide/ Meta Title: Best Mutual Funds for Regular Income - NRIs Guide Meta Description: Discover top SWP, dividend yield & hybrid funds for regular income. Transparent rankings by returns, AUM & ratings. NRI-friendly guide. Tags: Mutual Funds Tag URLs: Mutual Funds (https://getbelong.com/blog/tag/mutual-funds/) URL: https://getbelong.com/blog/mutual-funds/regular-income-funds/ ![Best Mutual Funds for Building Regular Income](https://prod.superblogcdn.com/site_cuid_clx4a3rx6000caheo10zipfw1/images/best-mutual-funds-for-building-regular-income-1766144734216-compressed.jpg) Every week, I receive messages from NRIs in Dubai asking the same question: "Ankur, I have AED 200,000 saved. How do I generate โ‚น50,000 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. ๐Ÿ‘‰ **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](https://getbelong.com/blog/retirement-city/) needs different funds than a 40-year-old building supplementary income. Your [NRI tax status](https://getbelong.com/blog/nri-taxation-guide-dtaa-benefits-itr-filing/) 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](https://getbelong.com/blog/mutual-funds-investment/). Your remaining corpus continues growing. This is more tax-efficient than dividend plans for most NRIs. Example: You invest โ‚น50 lakh in a [balanced advantage fund](https://getbelong.com/blog/mutual-funds/balanced-funds-vs-balanced-advantage-funds/). You set up a monthly SWP of โ‚น40,000. 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. ๐Ÿ‘‰ **Tip:** For NRIs, SWP from equity-oriented funds (65%+ equity) is often more tax-efficient than dividend plans due to favourable [LTCG taxation](https://getbelong.com/blog/nri-tax/tax-on-investments/). ## **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 (โ‚น 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 (โ‚น 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_ ๐Ÿ‘‰ **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 โ˜…โ˜…โ˜…โ˜…โ˜… 23.0% Moderate Dynamic Asset Allocation Parag Parikh Flexi Cap Fund โ˜…โ˜…โ˜…โ˜…โ˜… 20.90% Moderate Flexi Cap SBI Equity Hybrid Fund โ˜…โ˜…โ˜…โ˜… 16.64% Moderate Aggressive Hybrid ICICI Prudential Equity & Debt Fund โ˜…โ˜…โ˜…โ˜… 18.5% Moderate Aggressive Hybrid Canara Robeco Equity Hybrid Fund โ˜…โ˜…โ˜…โ˜… 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 โ˜…โ˜…โ˜…โ˜… 12.18% Low Conservative Hybrid Canara Robeco Conservative Hybrid Fund โ˜…โ˜…โ˜…โ˜… 10.5% Low Conservative Hybrid Kotak Debt Hybrid Fund โ˜…โ˜…โ˜…โ˜… 11.2% Low Conservative Hybrid SBI Conservative Hybrid Fund โ˜…โ˜…โ˜… 9.8% Low Conservative Hybrid _Source: Morningstar India, December 2025_ ๐Ÿ‘‰ **Tip:** For retirees prioritizing capital protection, conservative hybrid funds with 4-star ratings offer stability with modest growth. Compare these with [GIFT City FDs](https://getbelong.com/blog/nri-fixed-deposits-in-gift-city/) 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 (โ‚น 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 (โ‚น Cr) Fund Age 5-Year Return Min SIP SBI Dividend Yield Fund 9,094 2 years N/A โ‚น500 HDFC Dividend Yield Fund 6,191 5 years 22.89%\* โ‚น1,000 ICICI Prudential Dividend Yield Equity Fund 5,936 11 years 31.7% โ‚น1,000 UTI Dividend Yield Fund 3,822 20+ years 22.17% โ‚น1,000 \* _Since inception for funds less than 5 years old_ _Source: Groww, Value Research, December 2025_ ๐Ÿ‘‰ **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 โ‚น3,500 Cr โ‚น9,094 Cr Baroda BNP Paribas Dividend Yield Fund 2023 Dividend Yield โ‚น800 Cr โ‚น1,200 Cr HDFC Dividend Yield Fund Dec 2020 Dividend Yield โ‚น2,000 Cr โ‚น6,191 Cr Bajaj Finserv Balanced Advantage Fund 2024 Dynamic Allocation โ‚น500 Cr โ‚น1,500 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: โ‚น50 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 โ‚น30,000 โ‚น1.25 Cr โ‚น2.45 Cr โ‚น4.80 Cr โ‚น40,000 โ‚น95 Lakh โ‚น1.68 Cr โ‚น2.95 Cr โ‚น50,000 โ‚น65 Lakh โ‚น92 Lakh โ‚น1.15 Cr โ‚น60,000 โ‚น35 Lakh โ‚น18 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 โ‚น50 lakh, that's โ‚น2 lakh per year or approximately โ‚น16,667 monthly. This conservative approach helps ensure your money lasts 25-30 years. ๐Ÿ‘‰ **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 โ‚น1.25 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:** 1. **TDS is deducted at source** regardless of your actual tax liability 2. **File ITR to claim refunds** if TDS exceeds your actual tax 3. **DTAA benefits** may reduce your tax burden. Check [India-UAE DTAA guide](https://getbelong.com/blog/india-uae-dtaa-guide-for-nris/) for specifics 4. **Tax Residency Certificate** required to claim DTAA benefits. Learn how to [claim DTAA benefits](https://getbelong.com/blog/dtaa/claim-dtaa-benefits/) ๐Ÿ‘‰ **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](https://getbelong.com/tools/nri-fd-rates/) 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](https://getbelong.com/tools/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](https://getbelong.com/tools/gift-city-mutual-funds/), 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](https://getbelong.com/blog/nri-investment-gift-city/) 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](https://getbelong.com/blog/gift-city-benefits-for-nris/) 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](https://getbelong.com/tools/gift-city-mutual-funds/dsp-global-equity-fund/) for diversified equity exposure - [Tata India Dynamic Equity Fund](https://getbelong.com/tools/gift-city-mutual-funds/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](https://getbelong.com/tools/gift-city-mutual-funds/). ## **Next Steps** 1. **Assess your income needs:** Calculate exactly how much monthly income you require and for how long 2. **Check your tax status:** Use our [Residential Status Calculator](https://getbelong.com/tools/nri-residential-status-calculator/) to confirm your NRI status 3. **Ensure compliance:** Run the [Compliance Compass](https://getbelong.com/tools/compliance-compass/) to verify your investment eligibility 4. **Compare FD rates:** Use our [NRI FD Comparison Tool](https://getbelong.com/tools/nri-fd-rates/) to see if FDs suit part of your portfolio 5. **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](https://chat.whatsapp.com/EaxmhRZ6fTiChXQAZhqFK4) where many NRIs discuss income strategies daily. Ready to start? [Download the Belong app](https://app.getbelong.com/LywZ/blogs) 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 ## FAQs Q: Which mutual fund is best for monthly income? A:

โ€‹There's no single "best" fund. For SWP-based income, HDFC Balanced Advantage Fund and Parag Parikh Flexi Cap Fund have strong 5-year track records. For dividend-focused income, ICICI Prudential Dividend Yield Fund leads with 31.7% 5-year returns. Your choice depends on risk tolerance and tax situation.โ€‹

Q: How much corpus do I need for โ‚น50,000 monthly income? A:

โ€‹Using the 4% withdrawal rule, you need approximately โ‚น1.5 crore (โ‚น50,000 ร— 12 รท 0.04). With higher-returning equity funds and accepting more volatility, you might manage with โ‚น1-1.25 crore, but this carries more risk.โ€‹

Q: Are dividend yield funds safe for NRIs? A:

โ€‹Dividend yield funds invest in equity markets. They're not "safe" in the traditional sense. They're less volatile than growth-focused equity funds because dividend-paying companies tend to be established and stable. But capital fluctuation occurs.โ€‹

Q: What is better for NRIs: SWP or dividend plan? A:

โ€‹SWP from growth plans is typically more tax-efficient. SWP withdrawals are taxed as capital gains (12.5% LTCG for equity funds held over 12 months). Dividends are taxed at slab rates (up to 30%). Additionally, SWP gives you control over withdrawal amounts and timing.โ€‹

Q: Can US NRIs invest in these funds? A:

Yes, with restrictions. US NRIs can invest in funds from select AMCs including HDFC, ICICI Prudential, SBI, UTI, and a few others. Check FATCA compliance requirements before investing.

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