Fixed Deposit Monthly Income Schemes in Banks

Fixed Deposits (FDs) are one of India's most reliable and popular investment options, particularly for those seeking steady and risk-free returns. Among the various FD plans, Monthly Income Schemes (MIS) provide regular income, making them ideal for retirees or anyone requiring periodic payouts. This guide will take you through the details of FD Monthly Income Schemes, their benefits, and how to choose the right one for your needs.

What is a Fixed Deposit Monthly Income Scheme?

A Fixed Deposit Monthly Income Scheme is an investment option where the bank pays the earned interest on a fixed deposit account every month, rather than at maturity. It’s a non-cumulative scheme where the principal amount remains intact while the interest is paid out periodically. This scheme is perfect for investors looking for regular income while ensuring their capital remains secure.

How Does a Monthly Income FD Work?

When you invest in an FD, you deposit a lump sum amount for a fixed period (tenure) at a predetermined interest rate. The bank pays you the earned interest monthly, which can serve as a stable income source. However, it’s worth noting that the interest rates for monthly payouts are slightly lower than cumulative FDs, as the payout is spread across the investment period.

Top Monthly Income Fixed Deposit Schemes in 2024

Bank Name	Interest Rate	Scheme
SBI	7.00%	SBI Annuity Deposit Scheme
ICICI Bank	7.00%	Fixed Deposit Monthly Income Scheme
Canara Bank	7.15%	Fixed Deposit Monthly Payout
Axis Bank	7.25%	Regular Fixed Deposit
HDFC Bank	7.00%	Regular Fixed Deposit
Kotak Bank	7.20%	Regular Fixed Deposit
PNB	7.30%	Uttam Term Deposit
Bank of Baroda	7.05%	Monthly Income Plan
Union Bank of India	7.30%	Monthly Income Scheme
IDBI Bank	6.75%	Suvidha Fixed Deposit

Interest rates are indicative and subject to change. Verify with the respective bank.

Key Features of Monthly Income FDs

1. Tenure: FDs can range from 7 days to 10 years, allowing flexibility in your investment duration.

2. Minimum Deposit Amount: Most banks require a minimum deposit of ₹10,000 for MIS plans. However, premium plans may have higher requirements, like ₹15 lakh for certain schemes.

3. Interest Rates: Interest rates for monthly payouts are slightly discounted compared to cumulative FDs, as the bank disburses the interest regularly.

4. Premature Withdrawal: Early withdrawal is allowed in most schemes but attracts a penalty that varies from bank to bank.

5. Tax Implications: Interest earned is taxable under your applicable income tax slab. Banks deduct TDS if the total interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens).

6. Loan Against FD: Many banks offer loans up to 90% of the FD amount, enabling liquidity without breaking the FD.

Why Choose a Monthly Income FD?

• Steady Income: Monthly interest payouts make these FDs ideal for individuals relying on regular income, such as retirees.

• Safety: FDs are one of the safest investment options, offering fixed returns with minimal risk.

• Customizable Tenures: Flexible tenure options allow you to align your investment with financial goals.

• Guaranteed Returns: Unlike market-linked investments, FDs provide predictable income irrespective of economic fluctuations.

Popular Monthly Income FD Plans: Highlights

1. SBI Annuity Deposit Scheme

• Tenure: 36, 60, 84, or 120 months

• Minimum Deposit: ₹1,000

• Payout: Equated monthly installments, including interest and part of the principal

2. ICICI Bank Fixed Deposit Monthly Income Scheme

• Minimum Deposit: ₹1,00,000

• Tenure: Minimum of 24 months

• Partial Withdrawal: Not allowed

3. PNB Uttam Term Deposit Scheme

• Minimum Deposit: ₹15,00,000

• Tenure: 91 days to 120 months

• Premature Withdrawal: Not permitted

How to Calculate Monthly Interest on FDs?

FD interest can be calculated using simple interest or compound interest formulas. Let’s take a closer look:

Simple Interest Formula

Interest=P×R×T100\text{Interest} = \frac{P \times R \times T}{100} Where:

• PP = Principal

• RR = Rate of Interest

• TT = Tenure (in years)

Example:

If you invest ₹1,00,000 at 5% annual interest for 5 years: Interest=1,00,000×5×5100=₹25,000\text{Interest} = \frac{1,00,000 \times 5 \times 5}{100} = ₹25,000 Monthly Payout = ₹25,000 ÷ 60 = ₹416.67

Compound Interest Formula

A=P×(1+rn)n×tA = P \times (1 + \frac{r}{n})^{n \times t} Where:

• AA = Maturity Amount

• PP = Principal

• rr = Annual Interest Rate (in decimals)

• nn = Number of compounding periods per year

• tt = Tenure (in years)

Example:

For ₹1,00,000 at 5% annual interest compounded quarterly for 5 years: A=1,00,000×(1+0.054)4×5=₹1,28,204A = 1,00,000 \times (1 + \frac{0.05}{4})^{4 \times 5} = ₹1,28,204 Interest Earned = ₹1,28,204 - ₹1,00,000 = ₹28,204 Monthly Payout = ₹28,204 ÷ 60 = ₹470.07

Steps to Open a Monthly Income FD

1. Choose the Bank: Research interest rates and terms across banks.

2. Visit the Branch or Apply Online: Most banks allow online applications for FDs.

3. Provide Documents: Submit identity proof (Aadhaar, PAN) and address proof.

4. Select the Tenure: Choose the duration of your FD based on your financial goals.

5. Deposit Funds: Pay the investment amount via cheque, cash, or online transfer.

FAQs on Fixed Deposit Monthly Income Schemes

1. Who Should Invest in Monthly Income FDs?

MIS plans are perfect for:

• Retirees seeking regular income

• Individuals looking for stable returns

• Risk-averse investors

2. Can I Modify the Interest Payout Frequency?

Some banks allow changes to payout frequency (monthly, quarterly, annually) during the FD tenure. Check with your bank for details.

3. Are Monthly Income FDs Better Than Savings Accounts?

Yes, FDs offer higher returns compared to savings accounts, making them a better choice for long-term investments.

4. Are Senior Citizens Eligible for Additional Benefits?

Most banks provide higher interest rates (0.25%-0.50%) for senior citizens.

Conclusion

Fixed Deposit Monthly Income Schemes offer a secure and predictable way to generate regular income, making them a preferred choice for many investors. With a variety of options and competitive rates available, you can easily find a plan that aligns with your financial goals. Evaluate factors like interest rates, tenure, and payout frequency to make an informed decision. For added convenience, use online FD calculators to estimate returns and streamline your investment journey.