Benefits of getting monthly interest on your investment
Monthly interest income can provide a regular source of income for people who depend on their investments for their livelihood. It can be especially useful for retirees who no longer have regular employment or earning opportunities. Monthly interest can also be a useful tool for individuals who need a steady income to manage their household expenses or pay for their children's education.
Investing in a fixed deposit with a higher monthly interest rate can provide greater returns and long-term financial benefits. NBFC’s like Bajaj Finance offer on the highest returns of up to 8.65% p.a. on their FD.
For example, investing in a fixed deposit with a monthly interest payout of 8% on Rs. 2 lakh investment, you can get a monthly income of Rs. 1,333.
Monthly interest for Rs. 2 lakh FD
The monthly interest you earn on a Rs. 2 lakh Fixed Deposit depends on the interest rate offered and the deposit tenure. Non-cumulative fixed deposits pay out interest monthly, providing a regular income stream. Factors like senior citizen status and the bank or financial institution can influence the interest rate on Rs. 2 lakh FD.
FD monthly interest pay-out for deposits of Rs. 2 lakh
Amount
|
Interest rate(p.a.)
|
Interest per month
|
Rs. 2 lakh
|
6%
|
Rs. 1,000
|
Rs. 2 lakh
|
6.50%
|
Rs. 1,083.3
|
Rs. 2 lakh
|
7%
|
Rs. 1,166.7
|
Rs. 2 lakh
|
7.50%
|
Rs. 1,250
|
Rs. 2 lakh
|
8%
|
Rs. 1,333.3
|
Rs. 2 lakh
|
8.50%
|
Rs. 1,416.7
|
Rs. 2 lakh
|
9%
|
Rs. 1,500
|
Rs. 2 lakh
|
9.50%
|
Rs. 1,583.3
|
Rs. 2 lakh
|
10.00%
|
Rs. 1,666.7
|
Documents required for a Rs. 2 lakh fixed deposit
- Pan card
- Any KYC document like Aadhar card, Passport, Driving license, Voter ID
Reinvestment or cumulative FD
Cumulative fixed deposit is a type of Fixed Deposit where the interest earned is compounded and paid out along with the principal amount at the time of maturity. Unlike non-cumulative fixed deposits, which pay out interest monthly, quarterly, or annually, the interest on a cumulative FD is reinvested back into the deposit. This means your interest earns interest on itself, which can significantly increase your total earnings at maturity.
Cumulative FDs are a good option for investors who are looking to grow their capital over a long period of time. They are also a good option for those who do not need the regular income that is provided by non-cumulative fixed deposits.
TDS on FD interest income
Under the Income Tax Act, Banks and NBFC’s is required to deduct TDS on interest income earned on fixed deposits, if it exceeds a certain threshold limit, which currently stands at Rs. 40,000 per annum for individuals and Rs. 50,000 for senior citizens.
The TDS rate on FD interest income is 10%, which is levied and deducted by and NBFC’s at the time of credit of interest income in the investor's account. This means that the actual amount of interest income that the investor receives in hand may be lower than the stated interest rate due to TDS.
Conclusion
Fixed Deposit provides a secure investment avenue with predictable monthly returns. The importance of understanding interest rates, taxation, and necessary documents cannot be overstated. For investors who are looking for stable growth, fixed deposits can be a good choice. It's important to consider TDS before making any investment in FD. Always consult with financial experts before making investment decisions.
