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- Best Monthly Income Fixed Deposit Schemes 2024
- What is a Monthly Interest on Fixed Deposits?
- Features of Monthly Interest on Fixed deposits
- Popular FD Monthly Income Schemes: Features
- How Can You Earn Monthly Interest on Fixed Deposits?
- Why are Fixed Deposits With Monthly Interest Popular?
- How is the Interest on Fixed Deposits Monthly Interest Payout Calculated?
Fixed Deposits or FDs are one of the most popular and traditional savings instruments in India. Investment in an FD can be made for a few weeks to few months or few years at a fixed interest rate. In this article, we will cover in detail the monthly interest on fixed deposits along with its benefits. Also, we will see the calculation of interest on this monthly payout fixed deposits.
Best Monthly Income Fixed Deposit Schemes 2024
| Monthly Income FD Schemes | Highest FD Interest Rates |
| SBI Annuity Deposit Scheme | 7.00% |
| ICICI Fixed Deposit Monthly Income Scheme | 7.00% |
| Canara Bank Fixed Deposit | 7.15% |
| Axis Fixed Deposit | 7.25% |
| HDFC Regular Fixed Deposit | 7.00% |
| Kotak Bank Regular Fixed Deposit | 7.20% |
| PNB Uttam Term Deposit Scheme | 7.30% |
| Bank of India Monthly Deposit Scheme | 7.05% |
| Union Bank of India Monthly Income Scheme | 7.30% |
| Bank of Baroda Monthly Income Plan (MIP) | 7.05% |
| IDBI Bank Suvidha Fixed Deposit | 6.75% |
| Bank of Maharashtra Monthly Interest Deposit Scheme | 6.00% |
What is a Monthly Interest on Fixed Deposits?
Fixed deposit is an investment instrument offered by banks, post offices and NBFCs. In fixed deposits, individuals can deposit money for a fixed duration at a fixed interest rate. The rate of interest offered by fixed deposits is higher than the interest rate of savings accounts. Generally, the tenure of an FD account ranges from 7 days to 10 years. Therefore, once money is deposited in an FD account, it remains locked until maturity.
The interest amount on fixed deposits is either payable at regular intervals (monthly, quarterly, half-yearly or annually) or at the time of maturity, opted by the investor. If the investor chooses a monthly interest pay-out option, it must be noted that the interest offered by the bank is at a discounted rate. In case the investor chooses a cumulative option, where the interest gets accrued and is re-invested. Thus, the interest amount accumulated is paid at the time of maturity with the principal amount. The interest rates on monthly fixed deposits may vary based on tenure and amount, depending on the bank.
Features of Monthly Interest on Fixed deposits
The following are the features of monthly interest on fixed deposits.
- Tenure: The tenure of a fixed deposit ranges from a minimum period of 7 days to a maximum tenure of 10 years.
- Minimum Amount: The minimum amount for investment in monthly interest on an FD account may vary for different banks. Generally, for most banks, the minimum deposit amount is Rs. 10,000.
- Interest rate: The interest rate on monthly interest payout FD is usually lower than the regular fixed deposit account. In other words, the rate of interest which is offered for this type of FD is at a discounted rate.
- Premature Withdrawal: Most of the banks allow the depositors for premature withdrawals from their monthly payout FD accounts. However, the bank charges a penalty for withdrawing before maturity. The penalty may vary from bank to bank.
- Nomination Facility: The depositors can also nominate beneficiaries for their deposits.
- Tax: The interest earned on a monthly payout fixed deposit account is taxable. Also, the tax rate depends on the individual income tax slab rates.
- Loan against FD: Most of the banks offer loans against FD. This is to help depositors meet their liquidity requirements.
Popular FD Monthly Income Schemes: Features
SBI Annuity Deposit Scheme
SBI Annuity Deposit Scheme provides equated monthly instalment to its depositors. You need to invest a lumpsum amount to receive monthly income. The equated monthly payments include a part of principal amount as well as interest. As a result, the principal amount reduces.
- Deposit Tenure: 36, 60, 84 or 120 months.
- Minimum Deposit Amount: INR 1,000 and in multiples of INR 100 after that.
- Annuity Payment: On the anniversary date of the month following the month of deposit.
- Premature Withdrawals: Available, however, with a penalty.
ICICI Fixed Deposit Monthly Income Scheme
ICICI bank offers regular income for its depositors in the future for the lump sum amount invested today. Depositors can choose a suitable tenure for the scheme. Furthermore, the scheme allows you to receive regular monthly income as well as some amount as a lump sum. The tenure of the Monthly Income Scheme is a combination of the investment phase and the payout phase.
- Minimum Deposit Amount: INR 1,00,000 and in multiple of INR 25,000, thereafter.
- Minimum Investment Tenure: 24 months.
- Partial Withdrawal: Not allowed
- Premature Closure: Allowed, however, attracts a penalty.
Canara Bank Fixed Deposit
The fixed deposit scheme can be a source of monthly income for depositors. You can earn good returns with almost negligible risk.
- Deposit Tenure: 15 days to 10 years
- Partial Withdrawals: Allowed, in multiples of INR 1,000.
Axis Bank Regular Fixed Deposit
The Axis bank regular fixed deposit offers attractive interest rates, with zero issuance fees.
- Minimum Deposit Amount: INR 5,000
- Deposit Tenure: 7 days to 10 years
- Premature Withdrawal: Allowed
HDFC Regular Fixed Deposit
The Regular Fixed Deposit FD gives the depositor freedom and security. It provides guaranteed and substantial returns. Net banking makes it simple to schedule regular FDs. The program offers savers a monthly income.
Kotak Bank Regular Fixed Deposit
The regular fixed deposit account is a good alternative to holding idle cash in the savings bank account. The deposit account offers higher interest rates than the saving account.
- Minimum Deposit Tenure: 7 days and ten years.
- Partial Withdrawal: Not allowed
- Premature Closure: Allowed, however, attracts a penalty.
PNB Uttam Term Deposit Scheme
PNB uttam term deposit pays interest on a periodic basis. For monthly interest payments the interest is at discounted rate.
- Minimum Investment Amount: INR 15,00,000 and in multiples of INR 1, thereafter.
- Deposit Tenure: 91 days to 120 months
- Premature Withdrawal: Not available
- Partial Withdrawal: Not available
How Can You Earn Monthly Interest on Fixed Deposits?
In a fixed deposit, the individual deposits a fixed sum of money with the bank for a fixed period of time. Against this deposit, the bank pays a fixed rate of interest. The depositor has the choice to pick the mode of interest payment. There are two types of methods of receiving interest, i.e. cumulative and non-cumulative option. In the cumulative option, the interest is compounded quarterly and paid on maturity of the FD along with the principal amount. In the non-cumulative option, the interest is paid out to the depositor periodically, i.e. monthly, quarterly, half-yearly or annually.
One has to keep in mind that the interest rate changes based on the interest payout frequency chosen by the depositor. Therefore, the more frequently the depositor withdraws the interest, the lesser is the interest gain. One can use the FD calculator to compute their returns to plan their investments accordingly.
Why are Fixed Deposits With Monthly Interest Popular?
Fixed deposits with monthly interest payout are quite popular among investors who seek regular monthly income in the form of FD interest. It is primarily popular among retired individuals and steady pension holders. The significant difference between any other FD and monthly interest FD is that the investor receives interest every month on their FD corpus. Hence, this provides the investors with liquidity. Also, the rate of interest earned is slightly lower than the non-cumulative option.
One can use an FD calculator to estimate their interest on other FD and a monthly interest FD. Also, this will help the investor make an informed decision. Furthermore, monthly interest fixed deposit earn higher than what the investor will earn by letting the money lie in a current or savings account.
How is the Interest on Fixed Deposits Monthly Interest Payout Calculated?
The interest rate on FDs is predetermined at the time of investing and remains constant throughout the investment. There are a couple of factors that affect the fixed deposit interest rates. For instance, the tenure of the FD – the longer the investment period, the higher is the interest rate. The interest on a monthly payout fixed deposit can be calculated in two ways, i.e. simple interest and compound interest. It can be calculated using a formula, or one can use an FD calculator that is available online and free to use.
Simple Interest Formula
Simple interest is the interest earned on the principal amount at a fixed interest rate for a fixed time period.
Formula for calculation
Simple Interest = (P * R * T)/ 100
P- Principal amount invested
R- Rate of interest (%)
T- Tenure
Example
Mr Pratik invested Rs 100,000 for 5 years at an interest rate of 5% per annum.
Simple Interest = (Rs 100,000 * 5 * 5 years)/ 100 = Rs 25000
Here,
Principal amount invested is Rs 100,000
Rate of interest (%) is 5% per annum
The tenure of the investment made is 5 years
Monthly Interest Payout Value = Simple Interest/ (T *12)
= Rs 25000/(5 * 12)
= Rs 416
Compound Interest
Compound interest is the interest on the principal amount invested and the interest earned. The interest rate is raised by the number of periods (years) for which the interest will be compounded and multiplied to the principal amount invested.
Formula for calculation
A = P (1+r/n) ^ (n * t)
A = Maturity Amount
P = Principal amount invested
r = Rate of Interest (in decimals)
n = number of compounding in a year
t = number of years
Mr Pratik invested Rs 100,000 for 5 years at an interest rate of 5% per annum compounded quarterly.
Here,
The principal amount invested is Rs 100,000
The interest rate is 5%
Number of compounding in a year is 4 i.e. 1 every quarter
Number of years of investment is 5 years
A = 1,00,000 (1+0.05/4) ^ (4*5)
A i.e. maturity amount = Rs 1,28,204.
Interest amount = Rs 1,28,204 – Rs 1,00,000 = Rs 28,204
Monthly Interest Payout Value = Interest amount/ (T*12)
= Rs. 28,204/ (5*12)
= Rs. 470
Note: In both cases, the monthly interest payout value will be paid at a discounted rate. In other words, the rate will not be 5%, but it will be slightly lower than 5%, maybe 4.47% depending on the bank. The interest is paid to the depositor in advance, i.e. the first-month interest is born two months earlier (in quarterly compounding case). The interest for the second month is paid one month earlier and so on.
Using an FD calculator.
Most of the banks offer FD schemes that have the FD calculator facility on their website. The users can check the amount they stand to receive at maturity and the monthly interest amount. They have to enter details such as the amount of deposit, type of fixed deposit ( monthly pay-out in this case) and tenure. The calculator will show how much the investor stands to receive the aggregate interest amount on submitting the details.
Similarly, one can also use Scripbox’s FD calculator, an online tool available on the website and free to use. It helps to calculate the interest one can earn through their FD investment. To use the calculator, one has to enter the following details –
- Investment amount: The amount an individual wants to invest in an FD.
- Interest rate: It is the income that one earns on the FD investment. It is the interest rate offered by the bank. Thus, one can easily find it online based on the FD they want to invest in.
- FD period: It is the number of years one wants to invest in the FD
- Compounded: The individual can choose to receive interest regularly (monthly, quarterly, semi-annually and annually) or directly during maturity. Hence the compounding frequency can be monthly, quarterly or annually.
Once the above inputs are entered, the calculator gives the following results/outputs:
- Total investment: It is the total investment made in the FD.
- Wealth Gained: It is the interest earned on the FD.
- Total Corpus created: It shows how much the FD investment has grown from the time of investment till maturity. It is the total investment and wealth gained.
Thus, using an FD calculator gives accurate and desired results. It also saves time by performing the FD interest calculations in seconds.
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