Fixed Deposit Monthly Income Scheme

Understanding the Fixed Deposit Monthly Income Scheme

A Fixed Deposit Monthly Income Scheme is a fixed deposit variant that pays interest every month instead of at maturity. Depositors get regular payouts throughout the tenure, unlike traditional fixed deposits that release the entire interest at the end. This makes it suitable for those who want a predictable income to cover routine expenses or support retirement planning, while the principal remains safe until maturity.

Fixed Deposit Monthly Income Scheme Interest Rates

Below are the FD interest rates for some of the top banks and financial institutions below:

FD interest rates as of July 2026. Rates are subject to change.

Features and Benefits of Fixed Deposit Monthly Income Scheme

Some of the benefits and features of the Fixed Deposit Monthly Income Scheme are:

• Regular Monthly Income: The primary feature of an FDMIS is the provision of a fixed monthly income throughout the tenure of the deposit. This income is typically calculated as a percentage of the principal amount.
• Tenure Options: FDMIS offers various tenure options, ranging from a few months to several years. The longer the tenure, the higher the interest rate.
• Interest Calculation: Interest on an FDMIS is calculated every quarter and is added to the principal amount. The monthly income is then derived from this accumulated interest.
• Early Withdrawal: While most FDMIS allow for early withdrawal, there may be penalties associated with it. The penalty can vary depending on the bank or NBFC and the duration of the deposit.
• Tax Implications: Interest earned on an FDMIS is generally taxable. However, certain tax benefits are available, such as Section 123 of the Income Tax Act, 2025 (the provision that replaces the earlier Section 80C).

Benefits of Fixed Deposit Monthly Income Scheme

The following are the major benefits of a Fixed Deposit Monthly Income Scheme (FDMIS):

• Stable Income: FDMIS provides a consistent monthly income, making it ideal for individuals who require a regular cash flow.
• Low Risk: Fixed deposits are generally considered low-risk investments. The principal amount is relatively secure, making FDMIS a suitable option for risk-averse investors.
• Liquidity: While early withdrawal may incur penalties, FDMIS offers liquidity compared to other long-term investments like real estate or stocks.
• Tax Benefits: Senior citizens can avail tax benefits under Section 80C of the Income Tax Act, reducing their overall tax liability.
• Flexibility: FDMIS offers various tenure options, allowing investors to choose a plan that aligns with their financial goals and time horizon.

Eligibility Criteria for FD Monthly Income Scheme

The eligibility criteria for the FD Monthly Income Scheme are mentioned below:

• Individuals or associations can open a fixed deposit (FD) for a monthly income.
• Individuals must be at least 18 years old.
• Both Indian residents and Non-Resident Indians (NRIs) are eligible.
• Minors can open joint FD accounts with parents.
• Companies and Hindu Undivided Families (HUFs) can open an FD account.
• Associations or institutions are also eligible to open an account.

Documentation Required for FD Monthly Income Scheme

The list of necessary documents to open an FD monthly income scheme is mentioned below:

• Application form for opening a fixed deposit account
• 2 copies of passport-sized photographs
• Identity and address proof: Aadhaar card, PAN card, Voter's ID card, Driving License, etc.

Taxation on Fixed Deposit Monthly Income Scheme

The taxation on a Fixed Deposit Monthly Income Scheme (FDMIS) in India depends primarily on your income tax slab rates and the tenure of the deposit.

Key Tax Implications:

1. Interest Income:

   • Interest earned on an FDMIS is generally treated as ordinary income and is subject to income tax according to your tax bracket.
   • The interest earned is typically added to your total income, and taxes are calculated based on your overall taxable income.

2. Taxation on Fixed Deposit Monthly Income Scheme (FDMIS)

   The tax treatment of a Fixed Deposit Monthly Income Scheme (FDMIS) in India depends on your income tax slab and applicable deductions. Here are the key points:

   Interest Income (For All Investors)

   • The monthly interest received from FDMIS is classified as Income from Other Sources.
   • It is fully taxable and added to your total income.
   • Banks deduct TDS if the annual FD interest crosses the prescribed threshold.

   Section 123 (Applicable to Specific FDs)

   • Regular FDMIS deposits do not qualify for Section 123.
   • Only 5-year tax-saving fixed deposits are eligible, with deductions up to Rs 1.5 lakh per financial year on the amount invested, not on the interest earned.

   Section 80TTB (Exclusive to Senior Citizens)

   • Senior citizens (60 years and above) can claim a deduction of up to ₹50,000 per financial year on interest from deposits (savings, fixed, or recurring, including FDMIS).
   • This deduction is in addition to other deductions like Section 80C.

   TDS Exemption (Senior Citizens)

   • From FY 2025–26 (effective April 1, 2025): The TDS exemption limit for senior citizens has been raised to ₹1,00,000 per year.

How to Apply for Fixed Deposit Monthly Income Scheme?

Below are the steps on how to apply for the Fixed Deposit Monthly Income Scheme:

1. Choose a Bank or NBFC:

   Research different banks and financial institutions to compare interest rates, tenure options, and other terms.

2. Gather Required Documents:

   Prepare the necessary documents, which typically include: Identity proof (e.g., Aadhaar card, passport, driving license), address proof (e.g., utility bills, passport), etc.

3. Visit a Branch or Apply Online:

   Visit a branch, or you can apply for an FDMIS through their website or mobile app.

4. Fill Out the Application Form:

   Provide the required information, such as your name, address, contact details, desired deposit amount, and tenure.

5. Submit the Application:

   Attach the necessary documents and submit the completed application form.

6. Deposit the Funds:

   Deposit the desired amount into your new FDMIS account. The deposit can usually be made in cash, by cheque, or through online transfer.

7. Receive Confirmation:

   Once your application is processed, you will receive confirmation of the FDMIS account opening and its details.

How to Calculate Returns on Your FD Deposits?

Use an FD calculator to get instant results, or calculate manually with the compound interest formula: A = P (1 + r/n) ^ (n × t). Here, P is the deposit amount, r is the interest rate, n is the compounding frequency, and t is the tenure in years.

Enter the deposit amount, interest rate, and tenure into the calculator to get your maturity value and total interest earned.

Key Takeaways

Fixed Deposit Monthly Income Scheme (FDMIS) pays out interest every month instead of on maturity, making it a good option for retirees, homemakers, or anyone to cover regular expenses. The deposit amount stays safe and returns are fixed, so it suits investors who want predictable income without market risk. You can open an FDMIS through net banking, a bank's mobile app, or by visiting a branch, and most banks also allow premature withdrawal, though it comes with a penalty, but gives investors some flexibility if they need the funds before maturity.