Fixed deposits (FDs) continue to be one of the most trusted savings instruments in India, particularly for individuals who prioritise safety, stability, and predictable returns. When investing significant sums like Rs. 25 lakh, the primary objective for many is to maximise monthly income while remaining tax-efficient. In this article, we explore multiple strategies to optimise 25 lakh FD interest per month, evaluate how TDS on FD interest affects returns, and walk through the calculations involved in both post office and NBFC deposit options.
Understanding non-cumulative FDs for regular income
Fixed deposits offer two payout types: cumulative and non-cumulative. In cumulative FDs, interest compounds and is paid at maturity, while non-cumulative FDs pay interest at fixed intervals, including monthly, quarterly, half-yearly, or annually.
For investors seeking steady monthly income, non-cumulative FDs with monthly payouts are ideal. The monthly interest formula is:
Monthly Interest = (Principal × Interest Rate) / 12
Using this simple formula, investors can forecast their monthly income well in advance.
Current FD interest rates in 2025
Post office monthly income scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) is backed by the Government of India and provides stable income. As of 2025:
- Interest rate: 7.4% p.a.
- Maximum investment: Rs. 9 lakh for a single account and Rs. 15 lakh for a joint account
- Tenure: 5 years
- Payout frequency: Monthly
Since POMIS has deposit caps, an investment of Rs. 25 lakh requires splitting across multiple accounts.
NBFC FD rates
Non-Banking Financial Companies (NBFCs) such as Bajaj Finance offer competitive rates and more flexibility for larger deposits. Their features as of 2025 are:
- Non-senior citizens: Up to 6.95% p.a.
- Senior citizens: Up to 7.30% p.a.
- Tenure: 12 to 60 months
NBFCs are regulated by the Reserve Bank of India (RBI), and many hold AAA credit ratings, indicating a high level of safety for depositors.
Rs. 25 lakh FD interest per month: detailed calculations
NBFC – non-senior citizen
- Investment amount: Rs. 25,00,000
- Interest rate: 6.74% p.a.
- Annual interest: Rs. 25,00,000 × 6.74% = Rs. 1,68,500
- Monthly interest: Rs. 1,68,500 / 12 = Rs. 14,041.67
A non-senior citizen would receive approximately Rs. 14,042 monthly.
NBFC – senior citizen
- Investment amount: Rs. 25,00,000
- Interest rate: 7.07% p.a.
- Annual interest: Rs. 25,00,000 × 7.07% = Rs. 1,76,750
- Monthly interest: Rs. 1,76,750 / 12 = Rs. 14,729.17
A senior citizen would receive approximately Rs. 14,729 monthly.
Post office POMIS (after splitting deposits)
Due to deposit caps, Rs. 25 lakh is split as:
- Account 1: Rs. 15,00,000
- Account 2: Rs. 10,00,000
Calculations:
- Rs. 15,00,000 × 7.4% / 12 = Rs. 7,708.33
- Rs. 10,00,000 × 7.4% / 12 = Rs. 6,166.67
- Total monthly income: Rs. 7,708.33 + Rs. 6,166.67 = Rs. 13,875
The calculations clearly demonstrate that NBFCs offer higher monthly payouts than Post Office deposits, particularly for senior citizens.
Choosing tenure to optimise returns
The tenure directly influences the FD interest rate:
- Short tenure (1–2 years): Lower interest, higher liquidity.
- Medium tenure (3–5 years): Best rates and consistent monthly payouts.
- Long tenure (5+ years): Ideal for those seeking compounded growth via cumulative FDs.
NBFCs usually offer their best interest rates for tenures between 24 to 60 months, making them optimal for generating regular income.
TDS on FD interest and its impact
Interest earned on FDs is fully taxable under the head ‘Income from Other Sources.’ Financial institutions deduct TDS on FD interest if annual interest exceeds:
- Rs. 40,000 for non-senior citizens.
- Rs. 50,000 for senior citizens.
TDS calculations for Rs. 25 lakh FD
Non-senior citizen (NBFC)
- Annual interest: Rs. 1,68,500
- TDS @ 10%: Rs. 16,850
- Net annual interest: Rs. 1,51,650
- Monthly interest post TDS: Rs. 1,51,650 / 12 = Rs. 12,637.50
Senior citizen (NBFC)
- Annual interest: Rs. 1,76,750
- TDS @ 10%: Rs. 17,675
- Net annual interest: Rs. 1,59,075
- Monthly interest post TDS: Rs. 1,59,075 / 12 = Rs. 13,256.25
Even after TDS deductions, NBFCs continue to offer superior payouts compared to Post Office schemes.
How to minimise TDS legally
Individuals whose total taxable income is below the threshold may submit:
- Form 15G (for individuals below 60 years).
- Form 15H (for senior citizens).
Submitting these forms prevents financial institutions from deducting TDS, though the entire interest must still be declared when filing tax returns.
Additional tax liability beyond TDS
TDS deducted is only part of the tax obligation. The entire interest income must be declared, and total tax payable depends on the investor’s tax slab.
For example, if a senior citizen earns Rs. 1,76,750 and falls under the 20% tax bracket:
- Tax payable: Rs. 1,76,750 × 20% = Rs. 35,350
- Less TDS already deducted: Rs. 17,675
- Additional tax payable: Rs. 17,675
Proper tax planning ensures compliance and prevents tax dues from accumulating later.
Liquidity and premature withdrawal conditions
- Post Office: Premature closure allowed after 1 year, with reduced interest payout.
- NBFCs: Premature withdrawals permitted, subject to interest recalculation and applicable penalties.
Liquidity should always be considered before locking large sums into FDs.
How laddering strategy can optimise Rs. 25 lakh FD
FD laddering involves splitting Rs. 25 lakh into smaller FDs with staggered maturities, for example:
- Rs. 10 lakh for 1 year
- Rs. 10 lakh for 3 years
- Rs. 5 lakh for 5 years
Laddering offers multiple advantages:
- Regular liquidity at different intervals.
- Reduced reinvestment risk.
- Flexibility to reinvest matured amounts at prevailing rates.
Comparing safety between post office and NBFC FDs
- Post Office: Backed by sovereign guarantee, zero default risk.
- NBFCs: Regulated by RBI, many hold AAA ratings, indicating very high safety levels.
Both options are considered safe, but NBFCs provide slightly higher returns for those willing to accept marginally higher (but still very low) risk.
Managing FDs digitally
- NBFCs: Entire FD process — booking, renewal, and management — can be done digitally.
- Post Office: Though improving, many services still require physical presence at branches.
Digital convenience makes NBFCs particularly attractive for tech-savvy investors.
Summary
Maximising 25 lakh FD interest per month requires a balance between safety, returns, tax efficiency, and liquidity. Post Office POMIS generates approximately Rs. 13,875 monthly, while NBFCs offer Rs. 14,042 for non-senior citizens and Rs. 14,729 for senior citizens. Understanding TDS on FD interest, selecting appropriate tenure, using laddering, and taking advantage of tax exemptions through Form 15G or 15H ensures higher net returns. Both Post Office and NBFC FDs offer safety, but NBFCs provide higher flexibility, better digital convenience, and superior monthly payouts for investors seeking stable income from their lump sum investments.
Disclaimer: This article is intended for informational purposes only. Individuals must carefully assess all advantages, disadvantages and risks before participating or investing in the Indian financial market.
