Fixed deposits (FDs) remain a preferred choice for individuals seeking safety, guaranteed returns, and regular income from their investments. Many people with a large corpus often compare various institutions before investing their lump sum to maximise their monthly income. Two of the most popular options for such investors are Post Office schemes and Non-Banking Financial Companies (NBFCs). This article focuses on comparing the potential returns from investing Rs. 10 lakh, specifically analysing the Rs. 10 lakh FD interest per month offered by both Post Office and NBFCs.
Importance of choosing the right institution
While both Post Office and NBFCs offer secure fixed deposit options, their interest rates, tenures, payout frequencies, and flexibility vary considerably. For investors aiming to generate a regular monthly income stream, the payout option and interest rate are crucial factors in deciding where to park their funds.
Monthly payout structure in FDs
Both Post Office and NBFCs allow investors to opt for non-cumulative FDs where interest is paid out regularly rather than compounded till maturity. The non-cumulative option is particularly useful for retirees and those who depend on their FD interest for monthly expenses.
The monthly interest is calculated using the simple formula:
Monthly Interest = (Principal × Interest Rate) / 12
The rate quoted for non-cumulative FDs is slightly lower than cumulative FDs since interest is not compounded but paid out periodically.
Current FD interest rates in 2025
Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) is one of the most stable government-backed options available for generating regular monthly income. The features of POMIS as of 2025 are:
- Interest rate: 7.4% p.a.
- Maximum deposit: Rs. 9 lakh for individual accounts; Rs. 15 lakh for joint accounts
- Tenure: 5 years fixed
- Payout frequency: Monthly
- Government-backed with sovereign guarantee
NBFC FD rates
NBFCs such as Bajaj Finance, and others offer highly competitive rates on their FDs. These rates are among the highest in the market for non-banking institutions. The indicative non-cumulative monthly payout rates in 2025 are:
- For non-senior citizens: Up to 6.95% p.a. for tenures between 12 to 60 months
- For senior citizens: Up to 7.30% p.a. for similar tenure range
While NBFCs do not enjoy sovereign backing like Post Office, many top NBFCs carry AAA ratings indicating high safety levels.
10 lakh FD interest per month: detailed calculation
Let us calculate and compare how much monthly income Rs. 10 lakh would generate in both options.
Post Office (POMIS)
- Investment amount: Rs. 10,00,000
- Annual interest: 7.4%
- Monthly interest = (Rs. 10,00,000 × 7.4%) / 12
= Rs. 74,000 / 12
= Rs. 6,166.67
Thus, an investment of Rs. 10 lakh will generate approximately Rs. 6,167 every month.
NBFC (non-senior citizen)
- Investment amount: Rs. 10,00,000
- Annual interest: 6.74%
- Monthly interest = (Rs. 10,00,000 × 6.74%) / 12
= Rs. 67,400 / 12
= Rs. 5,616.67
Thus, a non-senior citizen will earn approximately Rs. 5,617 monthly from an NBFC FD.
NBFC (senior citizen)
- Investment amount: Rs. 10,00,000
- Annual interest: 7.07%
- Monthly interest = (Rs. 10,00,000 × 7.07%) / 12
= Rs. 70,700 / 12
= Rs. 5,891.67
Senior citizens will receive approximately Rs. 5,892 per month.
Taxation on FD interest
Irrespective of the institution, interest income from FDs is fully taxable under the head ‘Income from Other Sources’ in the Income Tax Act.
- TDS is applicable if interest exceeds Rs. 40,000 for individuals and Rs. 50,000 for senior citizens in a financial year.
- Tax is deducted at 10% if PAN is submitted and 20% if PAN is not submitted.
For example, if a non-senior citizen earns Rs. 6,167 per month in interest from the Post Office, their annual interest would be Rs. 74,004. If the person falls in the 20% tax slab, the tax payable would be:
Tax = 20% of Rs. 74,004 = Rs. 14,800.80
Similar calculations apply to NBFC FD interest.
Safety and risk considerations
Post Office (POMIS)
- Backed by the Government of India with full sovereign guarantee.
- Zero default risk.
- Fixed returns for 5 years.
NBFCs
- Regulated by the Reserve Bank of India (RBI).
- Many NBFCs hold AAA/Stable ratings from CRISIL and ICRA, indicating extremely low credit risk.
- Higher rates for senior citizens compared to Post Office.
While Post Office enjoys sovereign backing, top-rated NBFCs offer very high levels of safety, making both options reliable for capital preservation.
Liquidity and premature withdrawal
Post Office
- Premature closure allowed after 1 year with penalty charges.
- Withdrawal before 3 years reduces interest paid.
NBFC
- Premature withdrawal permitted, subject to specific terms and penalty deductions depending on how long the FD has been held.
Flexibility in tenure and reinvestment
NBFCs offer more flexible tenure options ranging from 12 months to 60 months. Investors can stagger their investments to suit cash flow needs using FD laddering.
For example:
- Rs. 3 lakh for 1 year
- Rs. 3 lakh for 3 years
- Rs. 4 lakh for 5 years
As each FD matures, funds can be reinvested at prevailing rates, creating periodic liquidity and potentially better returns.
Administrative convenience
NBFCs have made the entire FD booking process fully digital. Investors can open, manage, and monitor their FDs online. Post Office accounts are slowly moving towards digital processes but still require more in-person documentation compared to NBFCs.
Summary
When comparing the Rs. 10 lakh FD interest per month, the Post Office offers slightly higher monthly income for general investors at Rs. 6,167 compared to Rs. 5,617 for non-senior citizens in NBFCs. However, for senior citizens, NBFCs offer competitive returns of Rs. 5,892 monthly. While Post Office schemes provide sovereign guarantee and absolute safety, NBFCs offer greater flexibility, attractive senior citizen rates, and easy digital account management. Both investment options have their merits depending on individual financial goals, tax considerations, and liquidity preferences. The best NBFC FD rates combined with flexibility can make them suitable alternatives for long-term regular income seekers alongside the safety of Post Office deposits.
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.
