Where and How to Invest ₹2 Lakh Rupees in India for Monthly Income?
If you have 2 lakh rupees and are unsure about where to invest, there are plenty of options to consider. Your choice will depend on factors like your goals, time frame, and comfort with risk.
Let’s explore different options of investing ₹2 lakh rupees in India to help you make the right decision.
1. Best Short-Term Investment Options for 2 Lakh Rupees
If you need a short-term investment for 2 lakh rupees, the goal is to pick low-risk options that let you access your money quickly, without tying it down for too long. Here are a few options:
Fixed Deposits (FDs)
- Rate of Returns: 5%–6% per year
- Investment Period: 1 year or less
- Minimum and Maximum Amount: ₹1,000 to ₹2 lakh (or more)
- Tax Benefits: Taxable; TDS applies on interest exceeding ₹40,000
- Risk Level: Low
Why Choose Fixed Deposits?
Fixed deposits are one of the safest ways to park your money. They provide guaranteed returns and are great if you want to save for short-term goals like an upcoming trip or emergency expenses.
Liquid Funds (Mutual Funds)
- Rate of Returns: 6%–7% annually (on average)
- Investment Period: 3 to 6 months
- Minimum and Maximum Amount: ₹500 to ₹2 lakh (and above)
- Tax Benefits: Taxable on gains; short-term capital gains tax applies if sold within 3 years.
- Risk Level: Moderate
Why Choose Liquid Funds?
Liquid funds are a type of mutual fund that invests in short-term debt instruments. These funds are less volatile than stocks and are a great way to earn a bit more than an FD, without locking your money in for long periods.
Here are more short term investment plans for 3 months.
2. How to Invest 2 Lakhs for a Year or More
If you’re planning to invest your ₹2 lakh rupees for at least a year, you can consider options with higher returns than short-term investments.
Equity Mutual Funds
- Rate of Returns: 12%–15% annually (on average)
- Investment Period: 1 year or more
- Minimum and Maximum Amount: ₹500 to ₹2 lakh (or more)
- Tax Benefits: Taxable on gains; long-term capital gains tax (LTCG) applies after 1 year.
- Risk Level: High
Why Choose Equity Mutual Funds?
Equity mutual funds invest in stocks and provide higher returns than most other investment types. However, they also come with higher risk. If you have a longer time frame and can tolerate some market fluctuations, this could be a great option to grow your savings.
Stocks
- Rate of Returns: 15%–20% annually (based on the stock market)
- Investment Period: 1 year or more
- Minimum and Maximum Amount: ₹1,000 to ₹2 lakh (or more)
- Tax Benefits: Taxable on gains; long-term capital gains tax applies if stocks are sold after 1 year.
- Risk Level: High
Why Choose Stocks?
Directly investing in stocks is one of the riskiest options but can yield high returns. If you’re comfortable with market volatility and have researched good companies, this can help your ₹2 lakh grow in the long term.
3. Best Long-Term Investment for 2 Lakh Rupees
For those who are thinking where to invest 2 lakh rupees for more than 3 years, there are several long-term investment options that offer attractive growth potential.
Real Estate
- Rate of Returns: 7%–10% per year
- Investment Period: 5 years or more
- Minimum and Maximum Amount: ₹2 lakh to several crore (depending on the property)
- Tax Benefits: Tax deductions on home loans under Section 80C
- Risk Level: Moderate
Why Choose Real Estate?
Real estate has long been a solid investment choice, offering both capital appreciation and rental income. While it requires significant upfront costs, a small property investment or real estate investment trusts (REITs) can be an option for those with ₹2 lakh to invest.
Public Provident Fund (PPF)
- Rate of Returns: 7%–8% per year (compounded annually)
- Investment Period: 15 years (lock-in period)
- Minimum and Maximum Amount: ₹500 to ₹1.5 lakh per year
- Tax Benefits: Tax-free returns; qualifies for tax deduction under Section 80C
- Risk Level: Low
Why Choose PPF?
The PPF is one of the most secure investment options in India. It offers tax-free returns and is backed by the government. If you’re looking for long-term wealth creation with minimal risk, this is a solid choice.
4. Where to Invest 2 Lakhs for Monthly Income?
If your goal is to generate monthly income from your ₹2 lakh investment, consider these options that can provide steady returns.
Fixed Deposits (FDs)
- Rate of Returns: 5%–6% per year
- Investment Period: 1 year or more
- Minimum and Maximum Amount: ₹1,000 to ₹2 lakh
- Tax Benefits: Taxable; TDS applicable on interest exceeding ₹40,000
- Risk Level: Low
Why Choose FDs for Monthly Income?
Many banks offer monthly interest payouts for fixed deposits, which can serve as a steady source of income. The fixed rate of return makes it a reliable option for those seeking predictable monthly income.
Investors with 2 to ₹10 lakh rupees can safely select this option for monthly income without any risk.
Systematic Withdrawal Plans (SWP) in Mutual Funds
- Rate of Returns: 8%–12% per year (depends on the mutual fund)
- Investment Period: Ongoing
- Minimum and Maximum Amount: ₹500 to ₹2 lakh (or more)
- Tax Benefits: Taxable; short-term capital gains if withdrawn within 3 years
- Risk Level: Moderate to High
Why Choose SWP in Mutual Funds?
SWP (Systematic Withdrawal Plan) allows you to invest in a mutual fund and set up monthly withdrawals. This option lets you grow your wealth over time and create steady monthly income, with the potential for growth through market-linked returns.
5. Where to Invest 2 Lakhs for the Best Returns
If you are focused on getting the best returns for your 2 lakh rupees, here are your top options:
Real Estate Investment Trusts (REITs)
- Rate of Returns: 8%-12% annually
- Investment Period: 3 to 5 years
- Minimum and Maximum Amount: ₹2 lakh to higher amounts
- Tax Benefits: Taxable as per capital gains tax
- Risk Grade: Moderate
Why Choose REITs?
If you’re looking to invest in real estate but don’t have the capital to buy physical property, REITs can be an excellent option. A Real Estate Investment Trust (REIT) is a company that owns or finances income-producing real estate. It allows individual investors to invest in large-scale real estate projects and receive a share of the income generated by the properties, without having to own the property themselves. REITs are traded on stock exchanges, making them accessible to small investors with a relatively low capital investment.
REITs offer exposure to commercial properties, residential spaces, and industrial complexes, providing stable returns. These returns come in the form of dividends from rent income and capital appreciation over time.
Corporate Bonds
- Rate of Returns: 7%-9% annually
- Investment Period: 3 to 5 years
- Minimum and Maximum Amount: ₹10,000 to ₹2 lakh
- Tax Benefits: Taxable as per capital gains
- Risk Grade: Moderate to High (depending on the rating of the bond)
Why Choose Corporate Bonds?
Corporate bonds are debt securities issued by companies to raise funds for expansion or operations. When you invest your 2 lakhs in corporate bonds, you’re lending money to the company, which, in return, pays you regular interest over the life of the bond and returns your principal investment at maturity.
While corporate bonds offer relatively higher returns than traditional savings accounts, they come with risks. The risk of default is greater compared to government-backed debt instruments like G-Secs. However, by investing in high-rated corporate bonds (rated by agencies like CRISIL or CARE), you can reduce this risk. Corporate bonds are ideal for investors who want to earn higher interest income and are willing to take on some risk.
New Way to Support People and Businesses While Earning from Your 2 Lakhs
Beyond traditional options, there is a growing space where you can directly support individuals and small businesses while earning attractive ROI for yourself.
LenDenClub, best P2P lending company that connects people who have money with those who need it for personal goals or business growth.
You lend portions of your 2 lakhs to different borrowers across various risk profiles. They pay you back with interest over time, typically giving you monthly cash flow.
The platform handles all the paperwork, background checks, and collection processes.
What Makes This Appealing:
- Monthly cash flow starting from day one
- You’re helping real people achieve their goals
- Diversification across hundreds of borrowers reduces risk
- Average earnings of 12-14% annually
Portfolio Allocation Strategies by Age and Risk Profile for Investors with 2 Lakh Rupees
Conservative Investor Profile
Characteristics: Can’t afford to lose money, needs predictable returns
Age: Usually 45+ or those with specific short-term goals
Recommended Allocation:
- 50% Fixed Deposits/Debt Funds
- 30% PPF/ELSS
- 15% Gold
- 5% High-dividend stocks
Expected Return: 7-9% annually with low volatility
Moderate Investor Profile
Characteristics: Willing to accept some risk for better returns
Age: 30-45 with stable income
Recommended Allocation:
- 40% Equity Mutual Funds (Large Cap focused)
- 30% Debt Funds/FDs
- 20% PPF/ELSS
- 10% Gold/International Funds
Expected Return: 10-12% annually with moderate volatility
Aggressive Investor Profile
Characteristics: High risk tolerance, long-term horizon
Age: 20-35 with growth mindset
Recommended Allocation:
- 60% Equity (Mix of Large, Mid, Small Cap)
- 20% International Equity
- 15% ELSS/PPF
- 5% Gold
Expected Return: 12-15% annually with high volatility
Step-by-Step Action Plan for Your 2 Lakh Investment
Step 1: Define Your Goals and Timeline
Questions to Answer:
- When do you need this money back?
- What’s your risk tolerance?
- Do you need regular income from this investment?
- What are your tax-saving requirements?
Step 2: Emergency Fund Check
Before investing, ensure you have 6 months of expenses in a savings account or liquid fund. Don’t use your 2 lakhs for this if you don’t have emergency savings elsewhere.
Step 3: Choose Your Mix
For Beginners (Recommended Starting Portfolio):
- ₹60,000 in Large Cap Mutual Fund SIP (₹10,000 monthly for 6 months)
- ₹50,000 in Fixed Deposit (1-year tenure)
- ₹50,000 in PPF
- ₹40,000 in Liquid Fund (emergency accessibility)
Step 4: Open Required Accounts
- Demat account for stocks/mutual funds
- PPF account at bank or post office
- KYC completion for mutual funds
Step 5: Start Investing Systematically
Don’t invest all 2 lakhs on day one. Spread it over 2-3 months to average out market timing.
Step 6: Monitor and Rebalance
Review your portfolio every 6 months. If one investment grows much faster than others, rebalance to maintain your target allocation.
Common Mistakes to Avoid with 2 Lakh Investment
- Putting All Money in One Place: Don’t put all 2 lakhs in a single stock, single FD, or single mutual fund. Spread it across different options to reduce risk.
- Ignoring Inflation: A 6% return sounds good until you realize inflation is eating 4-5% of it. Your real growth is just 1-2%.
- Emotional Decision Making: Markets go up and down. Don’t panic sell during bad times or get greedy during good times. Stick to your plan.
- Not Considering Liquidity Needs: Don’t lock all your money in 15-year PPF if you might need it for a house down payment in 3 years.
- Ignoring Tax Implications: A 10% taxable return might be worse than an 8% tax-free return, depending on your tax bracket.
Business Ideas with 2 Lakh Investment
Your 2 lakhs can also become the seed money for a business that generates ongoing income.
Service-Based Business Ideas
Digital Marketing Agency
- Initial investment: ₹50,000-80,000
- Equipment: Laptop, software subscriptions
- Monthly potential: ₹30,000-50,000
Tutoring/Coaching Classes
- Setup cost: ₹40,000-60,000
- Monthly potential: ₹25,000-40,000
Event Management
- Initial investment: ₹80,000-1,20,000
- Per event profit: ₹10,000-25,000
Content Creation/YouTube Channel
- Investment: ₹60,000-80,000
- Equipment: Camera, editing software, lighting
- Income timeline: 6-12 months to monetize
Trading/Retail Business Ideas
Online Reselling
- Investment: ₹1,00,000-1,50,000
- Platforms: Amazon, Flipkart, Meesho
- Monthly potential: ₹15,000-30,000
Food Truck/Stall
- Initial setup: ₹1,50,000-2,00,000
- Daily profit potential: ₹1,000-2,000
Mobile Accessories Shop
- Investment: ₹1,20,000-1,80,000
- Monthly potential: ₹20,000-35,000
Franchise Opportunities
Several franchise options work with 2 lakh investment:
- Tea/Coffee outlets: ₹1,50,000-2,00,000
- Stationery stores: ₹1,00,000-1,50,000
- Mobile recharge/services: ₹80,000-1,20,000
Conclusion
Investing 2 lakh rupees offers many opportunities depending on your financial goals. Whether you are looking for short-term returns, steady monthly income, or long-term growth, there are multiple investment options available, each with its own benefits and risks.
Be sure to evaluate your risk tolerance, time horizon, and investment goals before making any decisions.
By choosing the right investment plan, you can maximise the returns on your ₹2 lakh while managing risk effectively. Always remember to diversify your portfolio to spread risk and enhance the growth potential of your funds.
2. Fixed Deposits (FDs)
Fixed deposit is a famous investment choice in India that guarantees your money’s safety and provides steady returns. You will get a fixed interest rate for a set period. When the term ends, you get back your initial amount along with the interest it earned over the period.
Features:
We have a fixed interest rate for a specific period.
Capital protection and assured returns.
Returns:
In the last 20 years, i.e., from 2000 to 2023, the average interest rate in India dropped from 10.50% to 5.90%.
Pros:
Low-risk investment with guaranteed returns.
Suitable for short-term goals.
Cons:
Lower returns compared to other options.
Interest income may be taxable.
Check out: How to Invest 50 Lakhs for Monthly Income
3. P2P Lending
When banks or financial institutions reject loans due to income, paperwork, or credit score, people often turn to friends or relatives for help. But this limits access to financing.
This is where Peer-to-Peer (P2P) lending comes. It connects lenders and borrowers directly, cutting out banks as intermediaries. P2P lending offers financial inclusion, especially who has low credit scores or lower incomes. It’s accessible through P2P lending platforms.
Question is how it works?
Borrowers and lenders register on a P2P platform. Borrowers’ creditworthiness is assessed, considering various factors. Lenders choose whom to lend based on risk and return preferences.
P2P platforms charge fees, regulated by RBI, but don’t hold onto lenders’ or borrowers’ money.
It’s a convenient way to bridge financing gaps.
You can diversify your portfolio by investing in Peer-to-Peer lending platforms, where you can lend money to individuals or small businesses, earning interest on your investment.
Features:
Lend money to individuals or small businesses through online platforms.
Earn interest on loans provided to borrowers.
Returns: Around 12% annually
Pros:
Diversify your portfolio with potentially higher returns.
Accessibility to a growing alternative investment market.
Cons:
Default risk as borrowers may not repay the loans.
Limited regulations and platform-dependent risks.
4. Public Provident Fund (PPF)
PPF is a popular and secure investment choice for those looking to grow their money. The 15-year plan is an excellent option for achieving your long-term life goals while keeping your investments safe. The PPF is backed by the government and is a savings scheme with tax benefits that gives you a secure and tax-free return.
Features:
Long-term government-backed savings scheme.
Earnings are tax-free.
Interest rate:
The current PPF interest rate is 7.1%
Pros:
Attractive interest rates
A lock-in period of 15 years promotes disciplined saving.
Cons:
Limited liquidity due to the extended lock-in period.
Withdrawals are subject to specific rules.
5. Mutual Funds
Nowadays, mutual funds are top-rated. You get the benefit of diversity and professional management. When you invest in mutual funds, your money is spread across a mix of stocks, bonds, and other things. This can make investing less risky than putting all your money into just one thing.
There are various types of mutual funds, such as large-cap, mid-cap, small-cap, equity, debt, or hybrid funds, to suit your risk appetite and investment goals.
Features:
Professionally managed investment portfolios.
Diversification across various assets.
Returns:
The average return on equity mutual fund schemes over the past 25 years is 17%
Pros:
Potential for high returns, depending on the fund type.
Accessibility to professional fund management.
Cons:
Market risks associated with fund performance.
Expense ratios and fees can impact returns.
6. Gold
In India, many families have used gold as a way to pass down their legacy. But buying gold for this purpose has become really expensive because of the high costs and charges.
Instead, there’s an option called Gold ETFs. They’re like ‘paper gold’ and include investments in gold stocks. You can buy them in smaller amounts according to your budget through the stock market, which makes it more affordable.
You can also invest in physical gold or sovereign gold bonds as a hedge against inflation and economic instability.
Features:
Investment in physical gold, Gold Exchange-Traded Funds (ETFs), or Sovereign Gold Bonds.
Hedge against economic instability.
Returns:
The return from gold from 20 years has been 12%
Pros:
Historically, gold has preserved wealth.
Gold ETFs offer liquidity and no storage hassles.
Cons:
Lack of regular income (unless in gold jewelry or ETF dividends).
Gold prices are subject to market fluctuations.
Conclusion
In conclusion, if you have to invest 2 lakhs rupees, two options stand out, one is P2P lending and the second is mutual funds. P2P lending offers direct participation in the growing world of online lending, potentially resulting in higher returns, while mutual funds offer diversification and professional management to help reduce risk and promote long-term growth. In terms of your financial journey, both options can be crucial, depending on your goals and risk tolerance. Therefore, these two options cover all your needs, whether you’re seeking higher returns or a laid-back approach.
In the end, the best option is the one that aligns with your financial objectives. So, consider your preferences and make the choice that suits you best on your financial journey.
Team LenDenClub
LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping investors diversify their investments beyond traditional investment instruments ever since.