Monthly Payout FD: Calculate Monthly Returns, Meaning Interest Rates
Fixed deposits (FDs) are a top choice for many in India, with a SEBI survey revealing that 95% of households lean towards FDs for assured returns. Even with market ups and downs, an FD promises consistent interest.
One edge FDs have over regular savings accounts is their superior returns, all while keeping the risk in check.
A key advantage of non-cumulative FDs is their ability to provide a steady income. The interest accumulated can be disbursed at set intervals, monthly, quarterly, semi-annually, or annually. This structure sets up a regular inflow, which is especially handy for retirees or as an extra income source.
However, before diving in, it’s essential to grasp the concept of the FD monthly payout to gauge your potential earnings. An ‘FD Monthly Payout Calculator’ can be valuable in this endeavour, helping you foresee your returns and appreciate its benefits.
Also Read: Experience financial growth with unmatched Bajaj Finance FD Rates
Monthly Interest Payout on Fixed Deposit
As mentioned earlier, the monthly interest on fixed deposits can offer a steady, predictable and regular source of income. You can receive the interest income every month on a specified date. However, you will receive the principal amount back when the fixed deposit matures.
Almost all financial institutions’ fixed deposits, like Banks and deposit-taking Non-Banking Financial Companies (NBFCs), offer the monthly interest payout option. You can choose the option while opening the fixed deposit. Once selected, the monthly interest payment would start the following month.
Interest Rates Offered by Banks
Here are some of the interest rates offered by the top Banks in the country for FDs across monthly payout tenures to yearly:
|Name of the bank
|Regular Interest Rates
|Senior Citizen Interest Rates
|Axis Bank FD
|3.00% to 7.10%
|3.50% to 7.75%
|YES Bank FD
|3.25% – 7.75%
|3.75% – 8.25%
|HDFC Bank FD
|3.00% to 7.10%
|3.50% to 7.75%
|State Bank of India FD
|3.00% to 7.10%
|3.50% to 7.60%
|RBL Bank FD
|3.50% to 7.80%
|4.00% to 8.30%
|Kotak Mahindra Bank FD
|2.75% to 7.25%
|3.25% to 7.75%
|Canara Bank FD
|4.00% to 7.25%
|4.00% to 7.75%
|City Union Bank FD
|5.00% – 7.00%
|5.00% – 7.50%
How to Calculate Interest for a Monthly Payout?
Most financial institutions specify the interest rate on an annual basis. To find out the monthly interest rate on the FD, you can use the annual rate and divide it by 12. Alternatively, using the principal, you can calculate the interest amount annually and back-calculate the monthly interest rate.
However, checking the compounding frequency while calculating the monthly interest payout would be best. If the frequency is yearly, you can divide the interest rate by 12 to get the monthly rate. However, the calculation would change if the interest frequency is quarterly, monthly or half-yearly.
The following examples would help you understand how to calculate the monthly interest payout on FD.
|7% per annum
|Monthly interest rate
|7% / 12 = 0.005833%
|Monthly interest amount
|0.005833% of ₹ 50,000 =₹ 291.66Alternatively,Monthly interest = (7% of ₹ 50,000) / 12= ₹291.66
|Monthly interest rate
|₹291.66/₹50,000= 0.005833= 0.5833%
Referring to the above example you can cross check your monthly interest by calculating it with an absolute number and cross check it with the interest computed by simply dividing by 12.
|7% per annum
|Amount after a year
|50,000 (1 + 0.07/2) ^ (1 * 2)= ₹53,561.25
|Interest after a year
|= ₹53,561.25 – ₹50,000= ₹3561.25
|Monthly interest amount
|Monthly interest rate
|₹296.77/₹50,000= 0.0059354= 0.59354%
If mathematical calculations prove challenging, you can use the fixed deposit calculators that many financial institutions offer. These online calculators help you calculate the effective monthly interest rate and the interest amount. You just have to provide the following details –
- The deposit amount.
- The tenure.
- The rate of interest on an annual basis.
- The compounding frequency – annually, monthly, half-yearly or quarterly.
- Choose the mode of payout as monthly.
Once you provide the details, you can calculate the interest income you can earn from your deposit annually and monthly.
Also Read: NPS Tax Benefits: Everything to Know
Advantages of Monthly Interest Payment on FD
With the non-cumulative fixed deposit, you get these benefits from monthly payouts –
- You get a guaranteed and regular source of income every month throughout the deposit tenure.
- The monthly interest payouts help you supplement the primary source of income.
- You can put the monthly interest payouts into another investment avenue and earn returns further.
- You can create a larger corpus to meet your financial goals as your savings increase.
Monthly payouts are suitable for retired individuals because these come with a regular income stream.
Also Read: How to Calculate FD Interest?
How to Convert from an Annual Interest Rate to a Monthly Interest Rate
One main thought is that people who invest in FDs wonder what their monthly interest rate will be. That being said, here’s a rather simple method to convert your Annual Interest rate into a Monthly Interest Rate.
Simple Division Method: This method is the most commonly used to arrive at the answer you are looking for. Simply divide your APR or Annual Percentage Rate by 12 to arrive at the figure you’ve been looking for. For example, if your APR for your FD scheme is 8%, then the monthly interest rate you will be getting is 8%/12, which amounts to 0.66% approximately.
What Happens During the Premature Withdrawal of Fixed Deposit?
Needing sudden liquidity of funds is a situation that might arise at least at one point in our lives. Despite the nature of FDs, banks and other institutions have allowed investors to withdraw their funds suddenly if they wish to do so, although at a price. If you’re looking to withdraw funds early, here’s what’s going to happen:
- Partial Withdrawals: Many banks permit you to take out only a portion of your FD. So, you can access some funds while the remaining amount continues to accrue interest.
- Interest Adjustments: Suppose you’ve committed to an FD for 5 years at 7% but decide to break it after 1 year. Instead of that promised 7%, you’ll likely receive the 1-year rate, which could be lower.
- Penalty Fees: Early withdrawal often comes with a cost. Banks might charge a penalty, which can reduce the interest you’ve earned.
- Documentation: Withdrawing early might require some paperwork. Each bank has its own set of protocols for this.
- Missed Benefits: Some FDs offer bonus interest rates for longer commitments. An early break could mean you miss out on these benefits.
- Financial Planning Impact: If that FD was set aside for a specific goal, dipping into it early might affect your future plans.
Steps to Prematurely Withdraw an FD
The steps to prematurely withdraw an FD are more or less the same across all banks, but the particulars might differ a bit. To have a closer look at how a premature FD withdrawal actually takes place, here’s the steps to do so for Axis bank.
Through Internet Banking:
- Access the online banking portal and choose ‘Accounts’.
- Select ‘Deposits’.
- Choose your FD.
- Opt for ‘Break FD’.
- Choose the account to receive the funds.
- Enter your NetSecure Code and Submit.
- Your request for FD closure will be processed immediately.
Axis Mobile App:
- Launch the Axis mobile app and select ‘FD/RD’.
- Choose your FD number.
- Choose ‘Close Fixed Deposit’.
- Enter your MPIN.
- Click ‘Submit’.
By Visiting an Axis Bank Branch:
Head to any Axis Bank branch, provide a photo ID and give them a signed Fixed Deposit Advice to close your FD account.
A non-cumulative fixed deposit scheme can create a monthly income stream for your expenses. The interest income would depend on the financial institution’s deposit rates, the tenure selected and the deposit amount. Further, senior citizens generally receive a higher interest rate as compared to general FD accounts.
You can calculate the monthly interest amount on FD using mathematical calculations or the online fixed deposit calculator. The calculations can help you estimate the monthly payouts to budget your expenses accordingly.
You can choose fixed deposit schemes that offer the highest monthly interest rates. This would ensure you get maximum returns from your deposits and can grow your wealth.
Is the monthly interest income taxable?
If you are aged below 60 years, the monthly interest you earn from your fixed deposit scheme would be taxable. The interest income would be aggregated over the financial year. It would be recorded under the heading ‘ income from other sources.’ Then, the interest income would become a part of your taxable income and be taxed at your income tax slab rates.
For instance, say you earn a monthly interest of 2000 from a fixed deposit account, and you fall in the 20% tax bracket. In this case, the aggregate interest income over a financial year amounts to 24,000. This income would be taxed at 20%, meaning you would have to pay a tax of 4800 on the interest income of 24,000.
However, the rules are different for senior citizens. Senior citizens are allowed a deduction of up to ₹50,000 on the interest income earned in a financial year. So, if their aggregate monthly interest income is within ₹50,000 in a financial year, they can claim a deduction under Section 80 TTB of the Income Tax Act, 1961. So, in the previous example, if you are a senior citizen, the monthly interest of Rs.2000 would be tax-free
What are the rules for TDS on interest income?
TDS is applicable on your fixed deposit interest if the aggregate interest income exceeds 40,000 in a financial year. The financial institution deducts a 10% tax at source from the interest income before crediting the interest into your account.
In the case of senior citizens, the limit is ₹50,000. If the interest income is within 50,000, there is no TDS. However, if it exceeds ₹50,000, 10% TDS will apply.
While the TDS is 10%, you might have to pay an additional tax on the interest income if you fall in the higher tax slabs. So, if you are in the 20% tax slab, you would have to pay another 10% tax on the interest. Alternatively, if you fall in the 5% tax bracket, you can claim a refund on the excess 5% TDS.
What are the minimum and maximum deposit amounts for the monthly interest rate?
The minimum deposit amount depends on the financial institution. Some require a minimum deposit starting from ₹1000, while others may have higher minimum deposit amounts.
As for the maximum deposit amount, there’s usually no limit.
Can I withdraw the fixed deposit before its tenure?
Yes, many fixed deposits allow premature withdrawals wherein you can withdraw the FD before the stipulated tenure. However, financial institutions levy a penalty in such cases and reduce the interest rates. It is usually charged around 0.5% – 1.00% of the interest rate.
Is a fixed deposit a good investment option?
Yes, a fixed deposit is a good investment option because of the following reasons:
> It is affordable.
> You get a guaranteed interest rate and are not exposed to volatility.
> Tax Saver FDs help you save taxes on a lock-in period of 5 years.
> Senior citizens get to enjoy higher interest rates and tax benefits on interest income.
> You can also choose a flexible deposit tenure depending on your needs.
Can we withdraw monthly interest on FD?
The monthly interest on FD is credited to your savings account. So, yes, you can withdraw it.
Is FD compounded annually or monthly?
FD can be compounded monthly or annually, based on the terms of the deposit.
Is monthly interest better than annual on fixed deposit?
Whether monthly interest is better for you or annual interest will depend on your investment goals. For instance, if you need a regular income from FD, monthly interest payout will be suitable option for you.
What is quarterly payout and monthly payout in FD?
For quarterly payout FD, the interest will be credited to your account on quarterly basis, while for monthly payout FD the interest will be
Do banks pay monthly interest on FD?
Yes, banks pay monthly interest on FD provided you select that option while opening an FD,
Can I obtain monthly interest on a fixed deposit?
Yes, many banks offer the option to receive monthly interest on a Fixed Deposit (FD).
Is monthly interest better than annual?
Whether monthly interest is better than annual depends on your financial needs; monthly can offer regular income, while annual can benefit from compound interest.
How will I receive the FD interest amount?
Typically, the FD interest amount is credited directly to your linked savings or current account or can be received via cheque.
Are there any additional benefits of investing in the case of senior citizens?
Yes, senior citizens often get a higher interest rate on FDs compared to regular depositors.
How can I find out how much money I have in a fixed deposit each month?
You can check your monthly FD balance and interest via your bank’s online portal, passbook, or by contacting the bank directly.