Fixed Deposit Monthly Income Scheme

Banks allow investors to choose the interest payout option on a fixed deposit (FD) when they book. Fixed Deposit Monthly Income Schemes can be a suitable option for investors who want regular and predictable returns from their savings. 

Continue reading to explore how FD monthly income schemes work, the latest interest rates, eligibility criteria, taxation rules, monthly payout calculation methods, and how you can start earning regular income through fixed deposit.

What Are FD Monthly Income Plans?

Fixed deposits allow investors to receive interest payout monthly, quarterly, on an annual basis or on a cumulative basis on maturity. FD monthly income plans are a type of fixed deposit that allows investors to receive interest credit on their savings accounts every month.

It ensures a regular income for investors investing a lump sum of money in fixed deposits for a specific tenure. The interest rate remains unchanged for the entire tenure of the fixed deposit booked by the investors.

FD Monthly Income Scheme Interest Rates

The table below illustrates the interest rates (principal below ₹3 Crore) across prominent banks in India for senior and non-senior citizens:

Benefits of Monthly Interest payout on FDs

Here are the benefits of fixed deposit monthly income plans:

Predictable Source of Income

As fixed deposits offer a predetermined rate of interest, investors can predict the amount of interest payout per month. Investors like retirees looking for a regular income can benefit by investing in FD monthly income plans. 

Careful Budgeting

The fixed returns of FDs help investors know the exact interest amount they will receive every month. As a result, investors can seamlessly align their interest earnings and expenditures based on accurate budget planning. 

Enhanced Cash Flow Flexibility

Monthly interest income from FD helps investors earn a steady regular income. This ensures a smooth cash flow to meet monthly expenses, unprecedented financial circumstances and short-term financial goals. 

Reinvestment Opportunities

As an investor, you can reinvest your earned monthly interest from fixed deposits into other financial instruments. This can help you diversify your investment portfolio and mitigate the risks of your equity investments. 

Eligibility Criteria for Monthly Income Plan Fixed Deposit

Here are the eligibility criteria for FD monthly income plans:

• The investor has to be at least 18 years old.
• A minor account fixed deposit can be opened with a guardian association.
• You can open a joint fixed deposit account to avail monthly interest payout.
• Hindu Undivided Family (HUF), associations, institutes and NRIs can open a monthly interest payout fixed deposit.

Documents Required for FD Monthly Income Plans

You need the following documents to book a fixed deposit with a monthly income plan:

• Identity proof such as a PAN card
• Address proof such as an Aadhaar card, voter card, driving licence or passport
• Passport-size photographs

How to Apply for Fixed Deposits with Monthly Interest Income?

You can seamlessly book an FD online or offline. For online FD booking, you can choose a platform that offers online FDs for different banks. Alternatively, you can visit your bank’s website to book an online FD. 

Choosing a platform that provides access to multiple banks' FDs can help you book an FD with the highest interest rate without any hassle. It helps you avoid visiting multiple bank websites to find out the highest interest rate. 

How to Calculate Monthly Income on a Non-cumulative Deposit?

Monthly income from a Fixed Deposit (FD) is calculated based on the investment amount, FD interest rate, and payout frequency selected by the investor. In a monthly payout FD, the bank pays the earned interest every month instead of reinvesting it until maturity. This option is commonly preferred by senior citizens, retirees, and investors looking for regular passive income.

Formula to Calculate Monthly FD Income

The basic formula used is:

Monthly Income = Principal Amount×Interest Rate/12

Example of Monthly FD Income Calculation

Suppose you invest ₹10 lakh in a Fixed Deposit at an interest rate of 8% p.a.

Then:

Annual Interest= ₹10,00,000×8%= ₹80,000 

Monthly Income= ₹80,000/12= ₹6,667

So, you will receive approximately ₹6,667 per month as FD interest income.

FD Calculator

Instead of calculating manually, investors can use an FD calculator to instantly check monthly payout, maturity amount, total interest earned and effective returns based on tenure and interest rate.

Taxation on FD Monthly Income Schemes

The following are the taxation norms on fixed deposits with monthly interest plans:

• If you book a tax-saving FD with a 5-year lock-in period, you can avail a tax exemption of up to ₹1.5 Lakhs every year under the Section 80C of the Income Tax Act.
• The interest income on fixed deposits with monthly income is subject to taxation. The interest income is taxed as ‘income from other sources’ and taxed as per your applicable income tax slab.
• Banks or NBFCs deduct a 10% TDS (tax deductible at source) for non-senior citizens if the total interest income during a financial year is more than ₹40,000.
• NBFCs or banks deduct a 10% TDS on the FD interest if the total interest earned in a specific financial year is more than ₹50,000 for a senior citizen. 
• Banks or NBFCs deduct a 20% TDS on the interest income if the investor fails to submit PAN card details. 

You can avoid TDS deductions by banks or NBFCs if you submit Form 15G (for non-senior citizens) or Form 15H (for senior citizens) at the beginning of the fiscal year. 

Conclusion

Fixed Deposit Monthly Income Schemes can be a suitable investment option for individuals seeking stable and predictable monthly returns without taking market-related risks. With flexible payout options, guaranteed interest rates, and easy investment access across banks and NBFCs, these FDs are especially useful for retirees, senior citizens, and conservative investors looking for regular cash flow. Before investing, compare interest rates, payout frequencies, taxation rules, and tenure options carefully to choose a monthly income FD plan that aligns with your financial goals and income requirements.