FD monthly payout

What is it

You deposit a lump sum with a bank for a fixed tenure (1-5 years), and instead of getting all the interest at maturity, you choose to receive it every month. It's the most familiar income product in India — simple, insured by DICGC up to ₹5L per bank, and available at any branch.

Bank FDs remain India's most widely held financial product by value, a legacy of decades of limited alternatives and strong trust in nationalised banks. The DICGC deposit insurance limit was raised from ₹1L to ₹5L in 2020 following the PMC Bank crisis, improving depositor protection at smaller banks.

Who it's best for

Anyone who wants a simple, familiar, bank-guaranteed monthly income with full flexibility on tenure.

Who should avoid it

You're in a high tax bracket and don't need monthly cash flow — a growth-option FD or debt fund may be more tax-efficient.

Pros

• Simple, familiar, and available at every bank
• DICGC insurance protects up to ₹5L per depositor per bank
• Flexible tenure — choose 1 to 5 years based on your need

Cons

• Interest is fully taxable, and TDS is deducted if it crosses the threshold
• Rates rarely beat inflation by much after tax
• Breaking the FD early usually costs a penalty (0.5-1% rate cut)

Key ratios to check