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FD monthly income: How to get a monthly income with a fixed deposit

Summary: Learn how to earn consistent monthly income from fixed deposits through smart investment strategies. Discover options like non-cumulative FDs, monthly income schemes, recurring deposits, and more to create a steady cash flow from your FDs.

14 Jun 2024 by IDFC FIRST Bank

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Fixed Deposits (FDs) are a popular investment avenue. Most people prefer parking their savings in FDs to earn interest on it. However, instead of locking in a lump sum amount until maturity, it is possible to get regular monthly payouts from your FDs. Here are some options if you want to generate monthly income from fixed deposits:

Let's examine the key factors

Interest on FDs are taxable, but here is how you can save it?

Choose a non-cumulative FD

Non-cumulative fixed deposits allow periodic payout of interest even before the FD matures. In contrast to cumulative FDs where the entire interest amount is paid out lumpsum at maturity, non-cumulative FDs offer the flexibility to receive interest at regular intervals – monthly or quarterly as per your preference. In non-cumulative FDs, the principal amount remains untouched, continuing to earn interest for the full tenure until maturity.

Only the interest earned is paid out at the chosen intervals in case of non-cumulative FD. For instance, if you opt for a quarterly payout, you will receive the interest amount every 3 months while the principal remains intact in the FD.

The key benefit of non-cumulative FDs is that they provide interim liquidity through periodic interest payouts. You can choose to reinvest this interest income or utilise it towards expenses. This regular interest payment can serve as a supplementary income to take care of monthly outgoings.

The overall interest earned in non-cumulative FDs is marginally lower compared to cumulative FDs for the same amount and tenure. However, the flexibility of periodic payouts makes it a suitable option for those looking for regular income. You can pick monthly or quarterly payout depending on your requirements.

Monthly income FD schemes

Some banks offer FD schemes where you can get the interest payout on a monthly basis. These are called 'monthly income schemes'.
In these schemes, you deposit the full FD amount as a lump sum, but the interest payment is given on a monthly basis.
The monthly payouts continue until the FD tenure completes.
Some banks offer monthly income FDs with tenures ranging from six months to five years. The interest rate is similar to regular FDs.
Monthly income FDs provide liquidity as you can plan expenses relying on the monthly interest payouts.
The principal amount along with the last interest instalment is paid on FD maturity.

Using FD interest payouts

Another option is opening a normal FD and choosing monthly interest payout frequency.

Here you deposit the lump sum amount just like a standard FD. However, the interest amount is credited to your savings account every month.

The principal remains untouched and is returned on FD maturity. The interest amount can be used to generate monthly income.

You can withdraw the monthly interest credited and use it for expenses. This creates a regular flow of funds.

The interest rate is similar to regular FDs and tenure options are flexible.

Recurring deposits

Recurring deposits allow you to make monthly contributions of a fixed amount for a pre-defined tenure.
It functions like a Systematic Investment Plan (SIP). On maturity, you get back the full deposited amount along with interest earnings.

By aligning the RD maturity with a specific monthly income requirement, you can use RDs to generate monthly income.

For instance, save monthly in an RD that matures every six months. Withdraw the payout for income and begin another RD.

FD Laddering

Open multiple FDs with staggered maturity dates, for instance quarterly.
As each FD matures every three months, withdraw the payout for monthly income.
Reinvest the principal amount into a new FD to continue the ladder.
This provides income every few months while the principal is reused for reinvestment.
You can also invest the payout from one matured FD into a new FD instead of withdrawing it for income.

To sum up

Fixed deposits offer assured returns and guarantee income at maturity. You can choose from the above methods to get a monthly income fixed deposit. However, bear in mind that an FD with a monthly payout will miss out on the benefits of compounding.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

FinFIRST Blogs

FD monthly income: How to get a monthly income with a fixed deposit

READ MORE

Let's examine the key factors

Interest on FDs are taxable, but here is how you can save it?

Choose a non-cumulative FD

Monthly income FD schemes

Using FD interest payouts

Recurring deposits

FD Laddering

Disclaimer

Benefits of Tax-Saving Fixed Deposits & Who Can Invest

Six Reasons Why Fixed Deposits Continue to Remain Popular

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Contents

FinFIRST Blogs

FD monthly income: How to get a monthly income with a fixed deposit

READ MORE

Let's examine the key factors

Interest on FDs are taxable, but here is how you can save it?

Choose a non-cumulative FD

Using FD interest payouts

Recurring deposits

Disclaimer

Benefits of Tax-Saving Fixed Deposits & Who Can Invest

Six Reasons Why Fixed Deposits Continue to Remain Popular

Related Products

Related Articles

Download IDFC FIRST Bank App

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