FD Returns Explained: How Much Monthly Income You Get on ₹5 Lakh Fixed Deposit After Tax

Fixed deposits (FDs) remain one of the most dependable investment choices for Indian savers, especially when market volatility and inflation create uncertainty. Even though stocks, mutual funds and gold offer higher return potential, many investors still prefer FDs for guaranteed earnings and capital safety. With rising living costs, financial planners suggest evaluating how much real income an FD generates after accounting for taxes and inflation.

So, if you invest ₹5 lakh in a fixed deposit today, how much monthly income can you expect? Here is the complete breakdown of interest earnings, taxation and the overall value of such an investment in today’s economy.

How Much Will You Earn on a ₹5 Lakh FD?

Interest earnings from a fixed deposit vary depending on:

• Bank or post office scheme selected

• Tenure of the deposit

• Whether the investor is a regular or senior citizen

Currently, most banks are offering 6.5% to 7.5% annual interest to general customers, while senior citizens often receive an additional 0.50%.

Let’s assume your FD earns 7% interest per year.

Some banks allow monthly interest payouts, but note that the overall annual interest may be slightly lower than cumulative or quarterly interest schemes.

How Much Tax Do You Pay on FD Returns?

FD interest is fully taxable. It is added to your total annual income and taxed according to your income tax slab.

Additionally, banks deduct TDS (Tax Deducted at Source) if the total annual FD interest exceeds:

• ₹40,000 for regular depositors

• ₹50,000 for senior citizens

Example Tax Calculation
If you are in the 5% tax bracket, earning ₹35,000 interest yearly:

• Tax payable = ₹35,000 × 5% = ₹1,750

• Post-tax annual earning = ₹33,250

• Effective monthly income = Approx. ₹2,770

Higher slab taxpayers (20% or 30%) will see a bigger tax impact, reducing the actual return further.

Benefits of a ₹5 Lakh FD

✔ Capital safety — no market-linked risk
✔ Assured returns — predictable income each month
✔ Easy to liquidate in emergencies (with small penalty)
✔ Useful for retired individuals or low-risk investors

FDs are particularly attractive to those who prioritize stable and guaranteed income over higher but uncertain returns.

What Are the Drawbacks?

While FDs offer security, they come with limitations:

❌ Returns often just slightly above inflation
❌ Full taxation reduces net gains
❌ Limited long-term wealth creation
❌ No major appreciation compared to equity or growth-based investments

For example, if inflation stays near 6% and your FD yields 7%, the real growth is minimal.

Is a ₹5 Lakh FD a Smart Choice?

It depends on your financial goals:

Recommended if —

• You need a fixed, steady monthly income

• You want zero-risk investment

• You are retired or risk-averse

Not recommended as only investment —

• If you aim to build wealth over the long term

• If you are comfortable with moderate risk for higher returns

Financial experts suggest a balanced approach — combine FDs with instruments like mutual funds, government bonds or gold to ensure both safety and growth.