Monthly Interest Payout on a Fixed Deposit of ₹5 Lakhs

Fixed Deposits (FDs) are one of the safest and most popular investment options for generating a steady income. If you plan to invest ₹5 lakhs in an FD, you might wonder about the monthly interest you can earn. This guide breaks down the monthly interest payouts across various banks, eligibility criteria, and the required documents to help you make an informed decision.

Monthly Interest for ₹5 Lakhs in FD in 2024

Here’s a table showing the monthly interest you can earn for a ₹5 lakh FD invested for a tenure of 5 years:

Bank Name	Interest Rate	Monthly Interest
Bank of Maharashtra	5.80%	₹2,417
City Union Bank	6.25%	₹2,604
Central Bank of India	6.25%	₹2,604
State Bank of India (SBI)	6.50%	₹2,708
Punjab National Bank (PNB)	6.50%	₹2,708
Bank of Baroda	6.50%	₹2,708
Axis Bank	7.00%	₹2,917
RBL Bank	7.10%	₹2,958
AU Small Finance Bank	7.25%	₹3,021
HDFC Bank	7.40%	₹3,083
ICICI Bank	7.60%	₹3,167
LIC	7.75%	₹3,229
Shriram Finance	8.47%	₹3,529

How Does an FD Generate Monthly Income?

When you invest in a fixed deposit, you can opt for a monthly payout option where the bank disburses the interest earned at regular intervals. For example, if you invest ₹5 lakhs at an interest rate of 7.50% for 1 year:

Annual Interest = ₹5,00,000 × 7.50% = ₹37,500
Monthly Interest = ₹37,500 ÷ 12 = ₹3,125

Documents Required for a ₹5 Lakh Fixed Deposit

To open an FD of ₹5 lakhs, the following documents are typically required:

For Individuals:

Proof of Identity: Aadhaar card, PAN card, passport, voter ID, or driving license.
Proof of Address: Utility bills, bank passbook with photo, registered rent agreement, or passport.

For Companies, HUFs, and Trusts:

Certificate of registration or partnership deed.
Memorandum and Articles of Association (for companies).
HUF deed for Hindu Undivided Families.

Eligibility Criteria for Opening a ₹5 Lakh Fixed Deposit

The following entities are eligible to open a fixed deposit:

Resident Individuals: Any Indian citizen above 18 years.
Senior Citizens: Special higher rates are offered.
HUFs: Hindu Undivided Families are eligible.
Non-Resident Indians (NRIs): NRIs can invest in NRE or NRO FDs.
Organizations: Companies, societies, and trusts can also invest.

Tax Implications on Fixed Deposits

TDS (Tax Deducted at Source): If the total interest earned in a financial year exceeds ₹40,000 (₹50,000 for senior citizens), TDS is deducted at 10%.
Declaration Forms: Submit Form 15G/15H to avoid TDS if your income is below the taxable limit.
Taxation of Interest: Interest earned is added to your income and taxed as per your applicable income tax slab.

Key Points to Consider Before Investing

1. Compare Interest Rates:

Rates vary between banks. Research thoroughly to find the best interest rates.

2. Choose the Right Tenure:

Longer tenure often yields higher interest rates, but ensure it aligns with your financial needs.

3. Early Withdrawal Penalties:

Most banks charge penalties for premature withdrawals. Check the terms before investing.

4. Senior Citizen Benefits:

If you are 60 or above, many banks offer an additional 0.25%–0.50% interest on FDs.

5. Safety of Funds:

All deposits up to ₹5 lakhs (principal + interest) are insured under the DICGC scheme.

Frequently Asked Questions

1. How can I open a ₹5 lakh FD?

You can open an FD online through your bank's internet banking or mobile app. Alternatively, you can visit the nearest branch and complete the formalities offline.

2. Can I extend the tenure of my FD?

Yes, you can extend the FD tenure at the time of maturity by opting for auto-renewal or manually renewing it.

3. Is there any benefit for senior citizens?

Yes, senior citizens typically receive an additional interest rate (0.25%–0.50%) on their fixed deposits.

4. What happens if I withdraw my FD early?

Banks impose a penalty for premature withdrawal, usually around 0.5%–1% of the applicable interest rate.

5. Can I split my ₹5 lakh FD across multiple banks?

Yes, you can diversify your FDs across different banks to benefit from varying rates and ensure better liquidity.

Conclusion

Investing ₹5 lakhs in an FD can be a great way to secure a stable monthly income. You can maximize your returns by choosing the right bank with competitive interest rates and planning for tax implications. Fixed Deposits offer safety and reliability, making them a perfect choice for conservative investors.