Fixed Income Monthly Plans: Everything you need to know

There are several investment options available in the market. Some ideal for high-risk appetite individuals and then there are those meant for risk-averse people. One such instrument is the monthly income scheme that is offered by banks and helps the investor earn supplementary income. The most famous one under this section is the fixed deposit monthly income program.

What is the about?

The FD monthly income plan is perfect for those who want to earn regular and fixed income monthly. This type of deposit promises fixed interests and guaranteed returns monthly. Apart from favouring the risk-averse individuals, it also supports the pensioners who are looking to augment some income their way through some means.

Here the interest earned gets directly credited to the investors’ account. The interest earned on such plans is like the ones you receive on a regular fixed deposit. The difference is that under the monthly income scheme, the investors can gain access to the interest earned monthly. Banks allow depositors to make interests from standard fixed deposits in discounted rates. These plans are related to the savings account.

Features and benefits:

Though the elements of such accounts vary from bank to bank, the other general features you may notice with such accounts are –

• Under some accounts, there is a minimum and maximum limit for depositing in such accounts.
• The interest is paid at discounted rates for monthly fixed deposit pay-outs
• Some banks also offer flexible options such as monthly, quarterly, or half-yearly plans.
• A few products come with credit ratings which is an indicator of how good the plans are.
• These deposits allow premature withdrawals from them.
• Almost all deposits offer nomination facilities nowadays.
• The duration for such deposits goes up to 10 years.
• Some banks allow you to withdraw up to 95 per cent of the deposited amount.
• The fixed deposit monthly income plan comes with overdraft facility on the savings and current account linked to the program. The excess amount required by the account gets withdrawn from the FD.
• No TDS gets deducted on the interest earned. This, however, is provided by selected banks only.

Interest rates:

They follow the same policy and rates as prescribed on regular term deposits. They also provide higher interest rates for senior citizens is around 0.25 per cent to 0.5 per cent over the applicable rates. Such rates are typically confirmed by the banks and hence, confirm the exact rate with the banks before investing. If you have been a past or are an existing employee with the bank where you apply for the scheme, you tend to receive higher interest rates.

FD calculator:

The monthly income scheme for FDs have a calculator as well to decide the monthly interest rates earned from the FD. The calculator determines the payable interest rates at the end of every month of the term deposit. You will find the instrument on the bank portal or aggregator website.

Eligibility:

The terms and conditions follow the same rule as those with regular term deposits where any individual, company, Hindu Undivided Family, or people association can open the FD. Even NRIs have access to the plan. The documents include your typical KYC ones along with the application form.