A Fixed Deposit (FD) is a savings tool that offers a safe and reliable way to grow your money. For those looking to invest ₹1 crore, opting for an FD with a monthly payout can provide a steady income stream. In this article, we will explore how to maximise monthly interest on 1 crore FD.

Understanding Monthly Payout FD

A monthly payout FD allows you to receive the interest earned on your deposit every month. This can be useful for individuals who rely on regular income. The interest rate varies across different banks and NBFCs (Non-Banking Financial Companies). It’s important to compare rates and choose the most favourable option.

Monthly payout FDs are especially beneficial for those who need a steady cash flow. This could be retirees or homemakers. It could also be anyone who prefers regular income over lump sum amounts. Banks and NBFCs offer various tenors for these FDs, and the interest rates depend on these tenors.

Key Factors to Consider

When aiming to maximise returns, several factors need consideration:

Interest Rates

Different banks and NBFCs offer varying interest rates. A higher rate means more interest income. It’s crucial to research these rates. Compare them before deciding where to invest your money.

Tenor

The duration of your FD impacts the interest rate. Longer tenors often attract higher rates. Consider your liquidity needs first. Do this before locking in your funds for an extended period.

Compounding Frequency

Monthly interest payouts may result in slightly lower returns compared to cumulative FDs. This is because cumulative FDs compound interest, leading to higher returns over time. However, the benefit of monthly payout FDs is the regular income they provide.

Taxation

Interest earned on FDs is taxable under the Income Tax Act, 1961. Understanding the tax implications can help in planning better. Tax planning can optimise your net returns.

Current Interest Rates

Interest rates for FDs change frequently. Here are some indicative rates offered by prominent banks and NBFCs. These rates are for a ₹1 crore FD with monthly payouts.

Bank/NBFC	Interest Rate (p.a.)	Monthly Interest (₹)
SBI	7.50%	62,500
HDFC Bank	7.75%	64,583
ICICI Bank	7.75%	64,583
Bajaj Finance	8.60%	71,667
PNB Housing Finance	7.75%	64,583

 

These rates can give you an idea of what to expect from your investment. Check the latest rates on the official websites of these banks and NBFCs. Do this before making a decision.

Compare Monthly Interest for FDs (5 & 10 Years): Regular vs. Senior

Interest rates often vary based on the tenor and the depositor’s age. Banks and NBFCs may offer higher rates to senior citizens as an added benefit. Here’s a breakdown of monthly interest payouts for tenors of 5 and 10 years:

Non-Senior Citizens

For non-senior citizens, the interest rates can be slightly lower. Senior citizens generally receive higher rates. Here’s a table showing the monthly interest payouts for different tenors:

Tenor	Interest Rate (p.a.)	Monthly Interest (₹)
5 Years	6.75%	56,250
10 Years	6.50%	54,166

 

Senior Citizens

Senior citizens often receive higher interest rates. This is an added benefit from banks and NBFCs. This can help them maximise their monthly income. Here’s a table showing the monthly interest payouts for different tenors:

Tenor	Interest Rate (p.a.)	Monthly Interest (₹)
5 Years	7.25%	54,166
10 Years	7.50%	56,250

 

Banks and NBFCs value senior citizens as customers. They provide these benefits to support their financial needs.

TDS on ₹1 Crore Fixed Deposit

Interest earned on FDs is subject to TDS (Tax Deducted at Source). If your interest income exceeds ₹10,000 in a financial year, banks will deduct TDS at 10%. This can be higher if you do not provide your PAN details. To avoid TDS, you can submit Form 15G/15H if your total income is below the taxable limit. Keep in mind, TDS is only a portion of the tax liability. You may need to pay additional taxes based on your income tax slab under the Income Tax Act, 1961.

Penalty for Early Withdrawal of FD

Withdrawing an FD before its maturity can lead to penalties. These penalties vary across banks and NBFCs. They usually involve a reduction in the interest rate. Some institutions may charge a flat fee for early withdrawal. It is essential to read the terms and conditions carefully before opting for an FD. This helps in understanding the penalty structure.

Premature withdrawal of FD can impact your returns significantly. It’s advised to avoid breaking your FD unless necessary. Some banks may allow partial withdrawals. This can be a better option than breaking the entire FD.

Benefits of Monthly Payout FD

Regular Income

Ideal for retirees or individuals needing a steady cash flow. This ensures financial stability and helps in managing monthly expenses.

Safe Investment

FDs are considered low-risk compared to other investment options. They offer guaranteed returns and protect your principal amount.

Predictable Returns

Fixed interest rates ensure you know the exact amount you will receive each month. This predictability makes financial planning easier.

Limitations

Lower Returns

Monthly payout FDs might offer slightly lower returns compared to cumulative FDs. This is due to the absence of compounding.

Taxation

The interest earned is taxable, which can reduce the net returns. Proper tax planning can help mitigate this impact.

Conclusion

Investing ₹1 crore in a monthly payout FD can provide a reliable and regular income. To maximise returns, compare interest rates and consider special rates. Plan your investments strategically. Remember to account for tax implications to optimise your net income. A monthly payout FD can be valuable with careful planning. It can enhance your financial portfolio.

Following these guidelines ensures your ₹1 Crore FD yields the highest monthly returns. Adhering to these tips will maximise your income. These strategies help maximise your investment. Make informed decisions. Regularly review your investment strategy to adapt to the changing market conditions. Always stay updated with the latest interest rates and terms offered by banks and NBFCs. This helps you make the best investment choices.