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.Read more
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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 Public Fixed Deposit Scheme|
|Fixed Deposit Scheme Name||Sanchay|
|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|
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|
|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
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
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.
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.
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.
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.|
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.
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.
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
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.
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.)
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.
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