Sometime back, I wrote about How much is Rs 1 crore FD monthly interest. Many readers mailed asking that they were conservative and risk-averse savers and liked the safety of fixed deposits. And so wanted to know how much will be the Rs 2 crore bank interest per month in India in 2020-21?
Not many people in India are able to ask such questions. 🙂
But jokes apart, the fact is that the monthly interest for Rs 2 crore fixed deposit in a bank might be a very good source of income for many people which can take care of the basic needs of a family for a very long time if not forever. Proper Retirement Planning will tell you that you need much more than Rs 1-2 crore to retire.
So let’s move on. How much do you think will be the monthly interest for Rs 2 crore in bank FD in 2020-21?
The answer obviously would depend on the rate of interest on FD of Rs 2 crore in banks. And different banks offer different rates of interest on fixed deposits. More so on fixed deposit rates for more than Rs 2-5 crores.
So first let’s see what are the FD interest rates for Rs 2 crore in India?
Depending on the duration of FD you choose, the interest rates vary. But since we are talking Rs 2 crore FD interest and in way of monthly income, it is safe to say that the depositor would want to park money for more than at least 1 year or so. Right?
As of now, the interest rate on Rs 2 crore fixed deposit range from 6.0% to 7.5% for most large banks (senior citizens get extra, generally additional 0.5% in fixed deposits in all banks). It’s possible that smaller banks may be offering more but smaller banks (and many corporate deposits) come with their own risks which are gradually becoming evident in India.
So assuming you are not running after the higher FD interest rate in India and risking your money, we shall assume that for earning FD interest on Rs 2 crore, you are looking to park money in safer large banks.
There is one more thing that you need to understand about FDs – the difference between cumulative and non-cumulative fixed deposit. And that is because you need monthly interest from Rs 2 crore fixed deposit.
So in a cumulative fixed deposit, the interest is compounded every quarter or year and paid at the time of maturity. On the other hand in a non-cumulative FD, interest is paid out monthly (or quarterly, half-yearly, or annually as per the depositor’s choice).
Obviously, the non-cumulative FD is more suitable for those who want to earn regular income via monthly interest payouts – which is the case here.
But in general, the returns from a cumulative FD are higher return than non-cumulative. And that is because your money remains in the FD to be compounded, unlike in non-cumulative FD where money gets paid out monthly – so less money remains available for compounding.
So even though the cumulative FD option gives slightly higher interest rate as compared to non-cumulative fixed deposits, you only get principal and earned interest after maturity (which may be after several years depending on the chosen FD tenure).
But since you need to know the monthly interest from Rs 2 crore fixed deposit, the non-cumulative FD is the way to go as it offers the chance to get interest pay-outs at chosen intervals, which is monthly in our case.
So now let’s get straight to the answer.
If you are looking to deposit Rs 2 crore in bank fixed deposit (FD) to have a monthly interest income, then you go for the non-cumulative fixed deposit.
Monthly interest on Rs 2 crore fixed deposit in 2020-21?
The answer is:
- If FD interest rate is 6%, then you get Rs 12 lakh on a fixed deposit of Rs 2 crore in a year. This means you get a monthly interest of Rs 1.0 lakh
- If FD interest rate is 6.5%, then you get Rs 13 lakh on a fixed deposit of Rs 2 crore in a year. This means you get a monthly interest of Rs 1.08 lakh
- If FD interest rate is 7%, then you get Rs 14 lakh on a fixed deposit of Rs 2 crore in a year. This means you get a monthly interest of Rs 1.17 lakh
- If FD interest rate is 7.5%, then you get Rs 15 lakh on a fixed deposit of Rs 2 crore in a year. This means you get a monthly interest of Rs 1.25 lakh
Obviously, the higher the rate of interest, the higher will be your monthly interest income.
So you need to find out for which deposit tenure you are getting the higher FD interest rate. But you also need to consider liquidity aspect. And unless the interest rates are very high, you may not want to lock your FD of Rs 2 crore for very long as its possible that in near future (when rate cycles turn), the FD interest rates may become higher. So you wouldn’t want to miss that opportunity. Isn’t it?
But mind you, these monthly and annual interest amounts are before-tax figures. The after-tax monthly interest income from the fixed deposit will be lower. So here is a small refresher on how fixed deposit interest is taxed in India:
Fixed Deposit Interest & Income Tax Rules (2020-21)
- The FD interest income fully taxable and when filing income tax, it comes under the head of ‘Income from Other Sources’.
- If the interest income from all FDs with a bank (but across all branches) is less than Rs 40,000, then the bank will not deduct any TDS. Otherwise, there would be a 10% TDS deduction if FD interest income exceeds Rs 40,000.
- But ideally, if your total income is less than the minimum taxable amount (read if Rs 5 lac is the zero tax limit in reality), then you are not required to pay any taxes. But if your FD interest is more than Rs 40,000, then the bank will deduct 10% TDS. In such a situation, to have zero TDS deduction by the bank, you need to submit Form 15G and Form 15H to the bank at the beginning of each financial year. The banks will not deduct TDS following the form submission.
- But if you fall in a higher tax bracket like 20% or 30%, then even though the bank is deducting 10% TDS, you have to pay the differential extra tax amount yourself before the filing of income tax returns for the financial year.
The actual interest you earn on deposited amount of Rs 2 crore in fixed deposit, depends on various factors including the amount invested (Rs 2 crore), tenure, rate of interest, interest computation frequency and taxation.
There is no doubt that FDs are practically risk-free investments, which can be used to generate a safe and reliable stream of monthly interest income.
I hope that all your questions related to Rs 2 crore FD interest per month in 2020-21 are addressed here. Also, many people contemplate what monthly interest on Rs 2 crore fixed deposit will they get? Hopefully, they too now have some mathematical answers about monthly interest on Rs 2 crore fixed deposit.
Note – If you have Rs 1 crore in 2020-21, then you can also read Monthly Interest on Rs 1 crore Fixed Deposit in India. Or if you have a smaller amount, then you can also read Monthly Interest on Rs 50 lakh Fixed Deposit in India in 2020-21.