A fixed deposit (FD) is likely to be the most secure option for investment as it gives guaranteed returns. It also provides an option to earn interest at once after maturity or on a regular basis. Let us look at how you can earn monthly income by investing in a fixed deposit.

Earn monthly income with a non-cumulative deposit.

There are two kinds of schemes under Fixed Deposit – cumulative and non-cumulative schemes.
In cumulative FD, you can invest lump sum money over a specific period and avail of returns (principal+interest) after maturity. Returns are generally higher in the case of cumulative FD.

In non-cumulative FD, you can earn a regular payout basis your investment. At the time of application, you can choose the payout frequencies as monthly, quarterly, half-yearly, or yearly. This option is best suitable for people who rely on a regular income to achieve their financial goals, such as senior citizens.
The tenure for a non-cumulative FD ranges 12-60 months. You can calculate the returns on non-cumulative FD using an FD calculator as follows:
a. Select the type of citizen i.e., senior citizen or customer below the age of 60
b. Select the investment amount
c. Select the tenure
d. Select the payout frequency as monthly, quarterly, half-yearly, or yearly

FD calculator is the best tool to foresee the returns you can earn in future and plan your investments accordingly.

What are the advantages of a non-cumulative FD?

If you want to invest your money and want interest as a regular payout in future, non-cumulative FD is the most suitable option. For instance, if a person is about to retire in 2-3 years and has no other source of income to rely on post-retirement. They can invest in non-cumulative FD and select payout frequency as monthly. They can then enjoy monthly income once their FD gets matured.

Let us understand via an example. Kapil is 57 years old and will be retiring after 3 years. He has no other income source after that to meet his basic financial expenses. He wants to invest Rs. 5,00,000 in something that would not only grow his savings but help him earn a monthly income to meet his financial need.

Use an FD calculator to check how much return he will get after investing Rs. 5,00,000 in FD for 3 years. Selecting the monthly payout option, you can find that the interest applicable on the FD is 7.16% p.a. The total interest earned would be Rs. 1,07,400, and the total maturity amount will be Rs. 6,07,400.

What are the returns in a non-cumulative FD?

Just like a normal FD, it also comes with attractive interest rates:
 *Special interest rates are offered on tenure of 15, 18, 22, 30, 33, and 44 months.

Senior citizens get an additional up to 0.25% rate benefit.