Monthly Interest Payout Fixed Deposit

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.

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.

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.

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.

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.

The monthly interest on FD is credited to your savings account. So, yes, you can withdraw it.

FD can be compounded monthly or annually, based on the terms of the 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.

For quarterly payout FD, the interest will be credited to your account on quarterly basis, while for monthly payout FD the interest will be

Yes, banks pay monthly interest on FD provided you select that option while opening an FD.