Letting ₹25 lakh grow for 3 years
Taking ₹14,583 a month for 3 years adds up to ₹5,25,000. The cumulative FD earns ₹5,78,598 in the same time, about ₹53,598 more, so for someone who doesn't need the income, cumulative pays better. But tax doesn't wait for maturity. The bank treats interest as earned every year, and in the first year that is ₹1,79,648, far above the ₹50,000 TDS limit for those below 60. About ₹17,965 is cut that year, usually from the deposit itself, so the real maturity comes out a little under ₹30,78,598. Paresh-bhai's business income puts him in a tax slab, so he pays any balance at his slab rate when he files.
The other point is insurance. DICGC covers ₹5 lakh per depositor per bank, principal and interest together. ₹5 lakh in a 3-year cumulative FD grows to ₹6,15,720, so part of it sits above the cover. To keep the whole maturity insured, the deposit in each bank has to stay near ₹4,06,029. Spreading ₹25 lakh over a few banks keeps most of it insured, and breaking one FD in an emergency leaves the rest running.
Frequently asked questions
How much interest per month on a ₹25 lakh FD?
About ₹14,583 a month at 7%, which is ₹1,75,000 a year. For a senior citizen at an example 7.5% it is ₹15,625 a month. Monthly payout often comes a little lower because banks use a discounted rate for it.
What is the ₹25 lakh FD maturity after 5 years?
About ₹35,36,945 at 7% compounded quarterly, so ₹10,36,945 of interest. After 1 year it is ₹26,79,648 and after 2 years ₹28,72,204.
Can I give Form 121 to stop TDS on ₹25 lakh?
Only if your total tax for the year will be nil, and below 60 the interest you declare must also stay within ₹4 lakh. If other income makes you pay tax, Form 121 is not for you. A false declaration is an offence.
Does splitting ₹25 lakh across banks save tax?
No. Each bank may stay under the ₹50,000 TDS limit, but every bank reports your interest against your PAN and tax is on the total. What splitting changes is insurance, since each bank covers you up to ₹5 lakh.
