Interest rates in the economy have dropped and fortunately the Reserve Bank of India did not cut interest rates recently. Getting decent interest rates on monthly income is extremely difficult. However, any individual who is looking for monthly income, can look at interest from fixed deposits or FDs. Here is a list of FDs that can generate regular monthly income. Bank FDs offer very low rates, so we have picked highly safe monthly income FDs of corporates.
Bajaj Finserv is a AAA rated deposit. The NBFC offers you an interest rate of 7.77 per cent on its monthly income FDs, if you place the deposit for 36-60 months. If you place the FD for a tenure of 12-23 months the interest rate is 7.53 per cent. On the other hand the interest rate increases to 7.72 per cent, if the tenure is between 24 and 35 months. This is a relatively safe deposit as the same comes from the Bajaj group. It is not a bad proposition and the interest rates are higher than bank deposits. You would probably not get interest rates on monthly income better than this.
HDFC Monthly Income Plan
Deposits from HDFC like, Bajaj Finserv are pretty much safe. The institution offers an interest rate which is slightly lower than that offered by Bajaj Finserv. If you invest in the deposit for a period of 15 months you get an interest rate of 7.25 per cent, while 22 months deposit gives you an interest rate of 7.30 per cent. A 30-month deposit at HDFC, offers you an interest rate of 7.25 per cent, while for 44 months the interest rate if 7.30 per cent. These are AAA rated deposits and hence are considered very safe.
This is not a AAA rated deposit, but, you should not care too much about the same, because the deposits are backed by the government of Kerala. KTDFC is a government owned institution. The interest rate offered is between 8.25 and 8.50 per cent. Senior citizens are entitled to a further 0.25 per cent extra interest rate. This is not a bad bet, if you are looking at some serious monthly income from fixed deposits.
Dewan Housing Finance also offers a decent interest rate to deposit holders. If you have a long-term perspective in mind. This is the best place to invest. The company's deposits are again highly rated, which makes them a good bet. On a 12 month deposit you get an interest rate of 7.65 per cent, while a 24 month fetches you an interest rate of 7.70 per cent. For a 48-120 month tenure the interest rate offered is 7.90 per cent. Under all cases the interest is paid on monthly basis.
Before you invest in these monthly yielding fixed deposits, there are a few things that you should remember.
Interest will attract TDS over Rs 5,000
If your interest income crosses Rs 5,000 in a given financial year, there will be a TDS that is deducted. The TDS would be 10 per cent of the interest paid. In the case of banks this is beyond Rs 10,000, which will attract a TDS. In case, your income is below the threshold limit of Rs 2.5 lakhs, you can submit a form 15h and form 15h as the case maybe.
Look for AAA rated deposits
It is extremely important to remember that one should look for AAA rated safe company deposits. This is because company deposits are unsecure deposits and there are chances of you losing your principal and interest amount, if the deposits are not secure. Therefore, invest in companies that have been well rated by Crisil, ICRA or other similar rating agencies.
Try and place money in non family earners name.
In case your wife is not working, it makes sense to place the money in her name to avoid TDS. This would prevent TDS and extra income tax liability on the salaried individual. Children can also place money in the name of their retired parents, who may not have regular income.