What Type of Fixed Deposit You Should Opt for Monthly Interest

Fixed deposits are the safest forms of investment. They provide you with a guaranteed source of income. Also, these deposits come with a lot of benefits.


 What is a fixed deposit?

A fixed deposit is a fixed amount which you deposit in your bank for a fixed period. An Fixed Deposit account is opened with any lending institution including banks, NBFCs and HFCs for this purpose. Also, the bank pays you a fixed amount of interest against the deposit.

 Properties of a fixed deposit account

•  They come with tenures ranging from 7 days to 10 years

•  This source of investment offers guaranteed returns

• The deposit made can be withdrawn partially or fully at a low penalty cost

• The interest can be received by the depositor monthly, quarterly, or annually

• You can also take a loan against the fixed deposits

• You can reinvest the income received from interests and gain from the compounding effect

 Factors to be considered before choosing a bank FD

The rate of interest should be compared and considered carefully. The bank which provides the highest FD interest rate can be selected.

• The rate of interest is fixed or floating.

• The medium through which the interest payments would be made

• The option of early withdrawal and related charges

• The frequency at which the amount is compounded

• Any other benefits that come along.

 Fixed deposits to opt-in for monthly interest payments

Various fixed deposit options are available with different banks. The interest can be cumulatively collected with the amount when the tenure ends. Also, FDs come with an option where the interest can be credited to the depositor monthly, quarterly or annually instead of at loan-maturity.

A non-cumulative deposit would be the best way to go if you want to receive the interest income monthly. This interest can be used to manage your daily expenses. The interest can also be received quarterly or annually depending on the choice of the depositor.

Features of a non-cumulative deposit

A non-cumulative FD deposit should be made in case you want a regular income from the money deposited:

• Just like any fixed deposit, it is a term deposit.

• During the investment phase, the money is deposited in the bank like a normal Cumulative Fixed Deposit, i.e. in lumpsum.
• It gives a monthly income during the payout phase.

• A non-cumulative Fixed Deposit account can be opened by an individual and can also be opened as a joint account.

• The minimum amount that can be deposited in case of non-cumulative FD is Rs.25,000 ad then in multiples of Rs.25,000

• The minimum period where the interest would be accumulated and not paid out would be a year.

•     The pay out phase will then repeat itself at an interval of a month.

•     Monthly interest payments are generally credit to the savings account of the depositor.

 Rate of interest

The interest rate for a non-cumulative deposit generally lies between 6-8%. This interest amount can be used as a fixed income to meet day-to-day needs. Also, the interest rate for senior citizens is on a higher side.

 
Tax Sphere

The interest earned on this deposit will be subjected to Tax Deducted at Source, also known as TDS. TDS is subject to the rules of the Income Tax Act, 1961.

Conclusion

Now that you have understood what a fixed deposit really entails and the types of fixed deposits, it will be easier for you to choose how you would like to invest your money. Non-Cumulative deposit is a perfect option for monthly payouts. Also, these investments are risk-free. These factors make it an excellent investment.