LIC Fixed Deposit Monthly Income Plan

Fixed deposits are fixed-income products usually offered by Banks, NBFCs, and Post Offices as the preferred mode to create wealth in the long term. However, LIC Housing Finance Limited fixed deposits have emerged as one of the most reliable term deposit instruments.

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For example, the Sanchay fixed deposit scheme offered by LICHFL, since its launch in May 2007 offers attractive interest rates besides flexible tenors. In addition, The FAAA/Stable rating by CRISIL is among the highest rating awarded to any deposit vehicle from a deposit-taking organization. Let us dig deeper into the scheme. 

LIC Fixed Deposit Monthly Income Plan – Information at a Glance:

LIC Public Fixed Deposit Scheme 
Fixed Deposit Scheme Name  Sanchay
Type  Public Deposit 
Available Options  Cumulative and Non-Cumulative
Minimum Deposit (Non-Cum) Annual Option: Rs.20000  followed by multiples of Rs.1000 Monthly option: Rs.2 Lac followed by multiples of Rs.10000
Eligibility  Individuals both resident and NRI, HUF, Partnership Firms, Association of Persons, Co-operative Societies, Proprietary Concerns, Trusts, and others as decided by the management from time to time
Tenor  1, 1.5, 2, 3, and 5 years
Interest Payment  Cumulative: On maturity with yearly compounding Non-Cumulative: Monthly or Annually 
Premature Withdrawal  Allowed subject to applicable rules
Loan against Deposit  Allowed up to 75% of the deposit amount
Renewal  Allowed 
Nomination  Allowed 

LIC Fixed Deposit Monthly Income Plan – Interest Rates:

The primary attraction of any fixed deposit is the interest rate offered on the investment. However, the LIC FD Monthly Income Plan is suitable for individuals and investors who draw their interest periodically. In this particular case, it is monthly. Therefore, the LICHFL offers a non-cumulative deposit scheme where you can withdraw the interest either monthly or annually, according to your convenience, to meet your periodic fund requirement. Accordingly, the following grids depict the current interest rates in the Monthly Income Plan.

Non-Cumulative Deposit Interest Rates effective from May 2022
Tenor  Deposit up to Rs.20 Cr Deposit above Rs.20 Cr 
Monthly  Annual  Monthly  Annual 
1 Year  5.45% 5.60% 4.85% 4.95%
18 months 5.75% 5.90% 5.15% 5.25%
2 Years  6.10% 6.25% 5.50% 5.60%
3 Years  6.25% 6.40% 5.65% 5.75%
5 Years  6.45% 6.60% 5.85% 5.95%
All quoted interest rates are per annum. 

Note: The interest rates are subject to change, please check LICHFL Website for the latest interest rates.

Points to note:

  • The deposit earns interest from the date of the fund credit to the LICHFL account through cheque, RTGS, NEFT, or IMPS

Interest Payment:

  1. Annual Option: 

    Electronic transfer or Interest warrant as desired by the depositor after TDS adjustment

    The interest is paid on 31 March every year

    Interest is compounded annually for cumulative deposit

  2. Monthly Option:

    Only through electronic transfer after TDS adjustment

    Interest paid on the 1st day of the month and on 31 March

  • Senior citizens enjoy an additional 0.25% per annum interest over the card rate.

  • You can deposit up to Rs.20 Cr from 1st to 15th and 16th to the last date of the month at the applicable card rate.

  • However, if the deposit exceeds Rs.20 Cr in the defined periods, the applicable interest rate is above Rs.20 Cr. 

LIC Fixed Deposit Monthly Income Plan – Features:

We have discussed all the salient points that make the LIC FD Monthly Income Plan an attractive proposition. Yet, several features need elaboration. Accordingly, let us consider them one by one. 

  1. Auto Repayment and Renewal:

    Repayment: Your LIC Monthly Income Plan becomes due for repayment upon maturity, depending on the tenor. Thus, the maturity amount gets electronically transferred to your bank account mentioned in the opening application form. It is essential to note that the maturity value of the non-cumulative deposit is the same as the principal as you have already drawn the accrued interest.

    Renewal:  If you have opted for the auto-renewal option while placing the deposit in LIC FD Monthly Income Plan, the principal gets renewed further for the identical deposit tenor.  It is essential to note that the renewed fixed deposit bears the same features as the original. However, the interest rate applicable is effective on the maturity/ renewal date. 

  2. Premature Withdrawal:

    You can request premature closure of your deposit account any time during the tenor to meet financial emergencies. However, the LIC management reserves the right to approve or reject the application at their sole discretion, subject to RBI’s Non-Banking Financial Company – Housing Finance Company Directions, 2021. The below grid depicts the interest impact:

    Completed Deposit Tenor  Applicable  Interest Rate per annum
    Less than three months subject to lock-in rules Nil 
    From 3 months to 6 months  3% per annum for the individual depositors and nil for others
    From 6 months until the maturity date  1% lesser than the applicable card rate for the deposit period.  If no rate is available for the period, then 2% is lesser than the lowest rate offered by the company or the rate applicable to the immediately previous period. 
  3. Nomination: 

    The facility is available only to individual depositors, either singly or jointly. If the deposit is in a minor’s name, the nomination is registered by the person lawfully entitled to act on the minor’s behalf. It is pertinent to point out that a Power of Attorney holder or any representative cannot nominate in the LIC FD Monthly Income Plan. The nominee has the right to receive any payment for the deposit which constitutes a total discharge of liability to LICHFL. 

  4. KYC Compliance: 

    It is compulsory under the RBI guidelines framed under Non-Banking Financial Company – Housing Finance Company Directions, 2021,   and the Prevention of Money Laundering Rules, 2002. Accordingly, you must submit the following documents with the deposit application form.

    • Latest color photograph

    • A self-attested copy of the PAN card

    • A self-attested copy of identity proof

    • A self-attested copy of the address proof

    • Duly filled and signed KYC form. 

    If the compliance exists with a previous deposit and the particulars are unchanged, you can mention the folio number to avoid duplication.

  5. Loan Facility:

    You can apply for a loan against the LIC FD Monthly Income Plan under the housing finance vertical. However, you must comply with the following to avail of the loan.

    • You can apply for the loan after three months from the deposit date

    • The approved loan amount is a maximum of 75% of the deposit

    • The applicable interest rate is 2% per annum above the contracted FD interest rate

    • You must repay the loan in a lump sum or adjust it against the maturity value

  6. TDS and Taxation:

    The interest earned on the LIC FD Monthly Income Plan is taxable per the extant laws. Accordingly, the rate of TDS is 10% during interest disbursal if you have registered your PAN card with them, while the rate is 20% without it. However, you can claim tax deduction up to Rs.40000 on your interest-earning for taxpayers other than senior citizens for whom the amount is Rs.50000. In addition, the LIC FD for a 5-year tenor qualifies for tax exemption under Section 80C of the Income Tax Act, 1961. 

LIC Fixed Deposit Monthly Income Plan – How to Open?

KYC compliance is one of the primary prerequisites for opening the LIC FD Monthly Income Plan. However, you need to submit the following documents to invest in a suitable scheme for the first time. You do not need to open the deposit under a single name, as the company allows joint accounts. In that case, each depositor must submit the documents. 

  • Duly filled and signed FD application form 

  • 2 Passport size color photographs

  • Copy of the PAN card

  • ID Proof (Aadhaar card, Passport, Driving License, etc.)

  • Address Proof (Any officially valid card containing an address or a current utility bill)

  • Age Proof (All the4 Id proof cards, Birth certificates, School Leaving Board certificates, etc.) 

Final Words:

LIC HFL fixed deposit is a reliable option for conservative investors who rely on banks and post offices to grow their money. Being a subsidiary of the LIC brand, they carry the legacy of the principal in business ethics and management. Moreover, the LIC FD Monthly Income Plan offers enough flexibility for the depositor’s comfort while earning an attractive interest to meet periodic financial needs.

FAQ's

  • Can you deposit an additional amount in the LIC FD Monthly Income Plan?

    A: While the LICHFL does not allow adding an amount to the existing FD, you are free to invest in a separate FD. However, remember that the DICGC insures deposits up to Rs.5 Lac under the RBI’s Deposit Insurance Scheme. On the other hand, LIC fixed deposits carry a AAA CRISIL rating signifying utmost safety.  
  • Is there any maximum tenor for NRI depositors in the LIC FD Monthly Income Plan?

    A: For NRI depositors, the maximum tenor allowed is three years as per existing norms. However, there is no bar on the investment amount. 
  • What is the impact of not submitting the PAN card while opening the LIC FD Monthly Income Plan account?

    A: The applicable TDS rate is 20% without the PAN card against 10%. In addition, the following consequences await you:
    • TDS certificate is not issued
    • You  will not receive a tax  credit for the TDS
    • All tax exemptions certificates are null and void
  • How do you determine if the interest earned from the LIC FD Monthly Income Plan is below or above the TDS threshold limit?

    A:  You can easily calculate the interest-earning using the FD calculator or the Income-tax calculator to determine your tax liabilities. 
  • How do the interest rates offered in LIC FD Monthly Income Plan compare with the interest rates in banks?

    A: The current deposit interest rates offered in bank FDs are lower than the LIC FD for identical tenors.
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