Bank Fixed Deposits (FDs) are one of the safest and most popular investment options for people looking to grow their savings. But did you know that FDs can also provide a steady monthly income? If you’re looking for regular payouts from your investment, especially after retirement, banks like State Bank of India (SBI), Axis Bank, and others offer a special scheme known as FD Monthly Interest Payout.
Let’s explore how this monthly income option in Fixed Deposits works, who it’s ideal for, and why it could be a great addition to your financial plan.
What is FD Monthly Interest Payout?
In a regular FD, you invest a lump sum for a fixed period and receive the combined principal and interest at the time of maturity. However, with the FD Monthly Interest Payout option, the interest earned is paid out to you every month, giving you a consistent source of income.
When applying for an FD, you can choose from two types of schemes:
- Cumulative FD: Interest is compounded and paid at maturity along with the principal.
- Non-Cumulative FD: Interest is paid out regularly at intervals – monthly, quarterly, half-yearly, or annually, based on your choice. The monthly option is ideal if you’re looking for a steady income.
Key Features of FD Monthly Income Scheme
- Flexible Deposit Amount: You can invest any amount based on your financial capability. There is no upper limit.
- Longer Tenure Options: Many banks offer FDs with tenures up to 10 years, which makes it a long-term source of income.
- Liquidity Advantage: Unlike many other monthly income plans, FDs offer better liquidity. You can withdraw funds if needed after completing certain formalities.
- No Processing Fee: There’s no fee involved in starting or maintaining this scheme.
- Fixed Returns: Since the interest rate is pre-determined and unaffected by market fluctuations, it provides a stable and secure income.
- Nomination and Loan Facilities: You can nominate a beneficiary for your FD. Additionally, banks offer loans against FDs, ensuring financial flexibility if you need funds during the tenure.
Who Should Opt for FD Monthly Income?
The FD Monthly Interest Payout scheme is particularly beneficial for those seeking a reliable and regular source of income, especially:
- Senior Citizens: It’s an excellent choice for retirees who want to ensure they have regular income in their golden years. Additionally, senior citizens typically receive higher interest rates on their FDs, up to 50 basis points more than the general public.
- Individuals with Fixed Financial Goals: If you need a stable monthly income to cover living expenses or support lifestyle goals, this FD scheme can be a good fit.
Tax Benefits and Rules for FD Monthly Income
If you invest in a tax-saver FD, you can claim deductions up to ₹1.5 lakh under Section 80C of the Income Tax Act. However, note the tax implications:
- If your interest income exceeds ₹40,000 in a financial year, the bank deducts 10% TDS (Tax Deducted at Source). For senior citizens, the threshold is higher, at ₹50,000.
- If you haven’t provided a PAN card, the bank will deduct 20% TDS.
A Smart Way to Earn Monthly Income
Whether you’re planning for retirement or seeking to supplement your income, the FD Monthly Interest Payout scheme offers a simple and secure way to earn regular returns. With options to withdraw, access loans, and even nominate beneficiaries, it’s a flexible plan that can fit various financial needs while keeping your money safe.
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