Understanding Monthly vs. Quarterly Interest Payouts in Fixed Deposits

Understanding Monthly vs. Quarterly Interest Payouts in Fixed Deposits

Understanding Monthly vs. Quarterly Interest Payouts in Fixed Deposits

Fixed deposits are known for their safety, predictability, and tax-saving potential. Your funds are locked in for a fixed period at an agreed-upon interest rate and stay protected from market volatility. This ensures your principal amount remains securely invested and you still reap the benefits of accruing interest.

Moreover, fixed deposits provide the added benefit of flexible interest payouts. By choosing a non-cumulative fixed deposit, you can receive interest payments on a regular basis, such as monthly or quarterly. This flexibility helps you customise your FD as per your financial goals and liquidity requirements.

Discussed below are detailed insights on monthly and quarterly interest payouts in fixed deposits.

Understanding monthly payouts in fixed deposits

Monthly payouts mean the bank disburses the interest earned on your investment every month. This option is like a steady stream of income flowing directly from your fixed deposit to your bank account.

Example: Suppose you invest ₹5 lakhs in an FD at an assumed annual interest rate of 6.70%, using a fixed deposit calculator, the total interest at the end of the year would be ₹33,314. With monthly payouts, this amount gets divided by 12, ensuring you receive a sum of approximately ₹2,776 every month.

Understanding quarterly payouts in fixed deposits 

Quarterly interest payouts mean the interest you earn gets credited to your bank account every three months. This approach gives your interest more time to grow before the bank transfers it to your account, making each quarterly payout slightly larger than the monthly option.

Example: Taking the same ₹5 lakh FD at a 6.70% assumed annual interest rate example, the interest for a quarter (three months) would be approximately ₹8375.

It is crucial to consider the fixed deposit interest rates when deciding between monthly and quarterly interest payouts. They impact the total interest earned over the FD period and determine the regular income you can earn.

What should you choose? Monthly or quarterly interest payouts? 

INDIE Fixed Deposits offer multiple payout options that bring the convenience of choice right at your fingertips. With high interest on fixed deposit plans and a 100% digital application process, selecting the right payout option is much easier. But which one should you choose, monthly or quarterly? Let’s explore the benefits of both.


Criteria Monthly Interest Payouts Advantages Quarterly Interest Payouts Advantages
Purpose This steady influx of cash can be a lifeline for managing monthly bills, groceries, or even small purchases. Can be useful for covering larger quarterly expenses as you get financial boosts 4 times a year.
Interest rate impact Though slightly lower due to the payouts frequency, they may still offer competitive returns suitable for those prioritising income. Enhance your fixed deposit interests through the power of compounding, thus earning better returns.
Compounding advantage While offering steady income, the compounding effect is less pronounced, making it a trade-off for immediate financial needs. Since the interest is added less frequently (only 4 times a year), the total return over its term is relatively higher.
Financial planning and budgeting Facilitate detailed monthly budgeting and financial oversight. You can align the returns with your spending patterns closely. Help you align the larger interest payouts with planned expenditures or investment opportunities.
Tax planning Require more immediate and regular tax planning due to the frequency of payouts, which could be a consideration for those in higher tax brackets. Less frequent payouts mean less frequent tax considerations, but the year-end tax liability must still be considered.

Both monthly and quarterly interest payouts have their advantages and suit different financial needs and goals. Monthly payouts offer a steady income stream, beneficial for those who need regular support for their expenses. Quarterly payouts leverage the power of compounding to offer a higher return on investment over the long term.

As you weigh your options, it is crucial to assess your financial situation, cash flow needs, investment goals, and tax implications. Doing so will help you make a decision that fits your financial plan better and maximises your benefits.