Fixed deposits are one of India’s most popular investment options that also provide guaranteed returns. While regular fixed deposits give a lump sum return on maturity, many banks offer a fixed deposit monthly income scheme in India. These schemes are tailored specifically for investors looking for a regular monthly income.
There are different types of FDs; some of them offer the highest FD interest rates, flexible maturity options, and flexible interest payout options, and some help you earn on a monthly basis.
What is a Fixed Deposit Monthly Income Scheme?
Fixed deposit schemes with monthly income refer to a fixed deposit that pays out the interest accrued at regular monthly or quarterly intervals. The investor will receive the principal amount or lump sum on the maturity, but the investors receives the interest periodically as the monthly income.
This makes it an ideal investment option for retirees, homemakers, salaried individuals, or anyone looking to supplement their regular income. The fixed interest payment is another income source that helps meet the monthly expenses.
Features of Fixed Deposit Monthly Income Schemes
Here are some key features of India’s fixed deposit monthly income schemes:
- Tenure of the fixed deposit monthly income scheme ranging across one year to 10 years is offered by the bank, which is in line with the investors’ financial goals.
- Such schemes offer the highest FD interest rates, making the returns one can expect at the time of investment clear. It is important to note that interest rates vary from bank to bank. Hence, investors must carefully evaluate their choices and then proceed.
- Different from the maturity date of traditional fixed deposits when interest is compounded and paid, the Monthly Income Scheme is advantageous to investors in that it offers regular payouts – normally on a monthly basis. This reason makes it a good choice for people whose income depends on regular income sources.
- Fixed Deposit Monthly Income Schemes are safe investment avenues because the same schemes are offered by banks, NBFCs, and other reputed institutions. The principal sum is normally not exposed to any risk, providing an assurance of safety for investors.
How do Fixed Deposit Monthly Income Schemes Work?
- Choose tenure and payout frequency: When opening an FD MIS, first decide your investment tenure and payout frequency – monthly, quarterly, half-yearly, etc. Most banks allow tenures between 6 months to 10 years.
- Interest payment frequency: The interest payment frequency aligns with your payout frequency. For example, if you select monthly payout, you will receive 1/12th of the monthly interest accrued.
- Receiving interest income: The interest amount will be directly credited to your linked savings account on the selected dates. For example, if you opt for a quarterly payout, you will receive the interest every three months.
- Maturity proceeds: You receive the full principal amount as a lump sum payment on maturity. No principal amount is paid out during the tenure in the monthly payouts.
The interest rates on these accounts generally follow the same rates as the ones allocated to regular-term deposits. Banks pay senior citizens a higher interest rate, which can be up to 0.5% on the usual rates. These rates are usually decided by the banks. So, it’s better to confirm the rates with the banks beforehand.
Advantages of FD Monthly Income Schemes
Here are some major benefits of fixed deposit monthly income schemes:
- Regular income flow: The biggest advantage is that it provides a fixed, periodic income at regular intervals. This income can be used to meet the recurring expenses.
- Flexible payout options: You can choose payout intervals – monthly, quarterly, half-yearly, or even annually based on your need for liquidity.
- Guaranteed returns: FD MIS offers guaranteed returns that are not dependent on market conditions. You lock in an interest rate at the time of the investment.
- Capital protection: Your principal is 100% secured, and you receive the full amount upon maturity. There is no investment risk or capital erosion.
- Higher interest rates: Some banks offer 0.25% to 0.5% higher interest on FD MIS than the regular FDs.
- Overdraft facility: You can avail overdrafts against your FD MIS up to a certain limit to meet your urgent expenses.
Who Should Invest in FD Monthly Income Schemes?
Given the regular income and assured returns, fixed deposit monthly income schemes are ideal.
– Retired individuals looking for a steady monthly income.
– Homemakers looking for financial independence
– Salaried individuals looking to supplement their income
– Children’s education planning or marriage planning
– NRIs looking for monthly income from the India investments
– Safe investment option for the elderly parents/dependents
– Those with limited risk appetite looking for the guaranteed returns
Things To Consider Before Investing FD Monthly Income Scheme
- Interest Rate Variability:
Investors must have knowledge of the market interest rate fluctuations at hand. Though FD MIS assures a predetermined interest rate at the time of investment, external factors can affect future returns.
- Tax Implications:
Fixed deposits monthly income schemes interest is taxable. Hence, when proceeding with the scheme, you must compute the tax liability while evaluating total returns. If possible, you can apply for tax waivers and also file IT returns to claim any deducted taxes.
- Liquidity Constraints:
There are penalties for untimely withdrawal from Fixed Deposit Monthly Income Schemes. Investors must consider how much funds they require over a certain period before buying a specific scheme.
- Inflation Considerations:
While the scheme provides guaranteed returns, they need to concern themselves with inflationary tendencies and their resultant effect on their purchasing power.
Eligibility To Get Monthly Income Fixed Deposit
- Associations or individuals can open an FD to benefit from the MIS.
- The individual must attain 18 years of age.
- The citizen must be India or non-Indian.
- Minors can open an FD account, yet such accounts will be jointly operated by their parents.
- Companies and HUF can also benefit from MIS.
Besides meeting these requirements, you need to submit a few essential documents to the bank, including an application form for FD opening, Aadhar, PAN Card, passport-sized photographs, and any others mentioned by the bank.
Conclusion
To find the highest fixed deposit monthly income scheme returns before investing, compare the interest rates, tenure, and payout options across the leading banks. Opting for auto-renewal on the maturity helps to continue earning periodic income seamlessly. Comparing the highest FD rates for your MIS becomes easy with Wint Wealth. With an easy-to-use platform, investors can seamlessly compare FD rates and book. So, check out Wint Wealth today.